Felsberg advises Paranapanema on debt settlement

Felsberg Advogados advised Paranapanema, the Brazilian copper producer, on a transaction with the creditors of its Global Agreement that extinguished about R$ 3.94 billion, or 92.3%, of its R$ 4.27 billion total debt. The company remains in judicial recovery. The matter is valued at R$ 6.5 billion (USD 1.1 billion) and is cross-border, involving Brazil and the US.

According to a material fact notice, all conditions precedent to the transaction have been fulfilled and all payments under the settlement instrument have been made. The instrument was later amended twice. The debt reduction required a cash disbursement of R$ 100 million in new funds, paid with proceeds from the company’s 11th issuance of convertible debentures.

The remaining balance of R$ 327.4 million will be settled solely with proceeds from the monetization of nine judicial credit rights over a 36-month period, without drawing on operating cash. At the end of that period, any unpaid portion will be extinguished, even if not fully received. The partial settlement agreement also provides for the transfer to creditors of amounts held in escrow and judicial accounts, together with the assignment of the economic benefits of those nine judicial credit rights.

Felsberg’s team was led by partner Fabiana Solano and also included Thomas Felsberg, Ricardo Higashitani, André Drumon and André Milliet.

The firm previously advised Paranapanema on the restructuring of bank debt arising under a Global Agreement entered into in 2017 with 11 financial institutions. After years of negotiations and successive restructurings, the parties reached a settlement involving reciprocal concessions and a discount exceeding 90% of the updated debt. [CHECK: potential reference to other operations, search for them on our websites and insert any link] Paranapanema later failed to comply with the terms of that restructuring, which led to the new renegotiation with the financial creditors that has now been concluded.

Felsberg also assisted with the new agreement with key financial creditors holding claims outside the court restructuring proceedings. It provides for a substantial reduction of the secured debt in exchange for a significantly lower repayment amount, with part of the consideration funded through the release of funds held in court and in escrow.

The firm also represents Paranapanema, which operates Brazil’s copper smelter and produces refined copper products, in its court restructuring. That process covers about R$ 500 million in liabilities to suppliers and employees. Felsberg is also advising the company on debtor-in-possession financing, structured as a revolving credit facility of up to R$ 150 million per month with a minimum drawdown of R$ 20 million, to support working capital and operations.

In addition, Felsberg recently concluded a renegotiation of about R$ 100 million in labour claims subject to the court restructuring. Those claims are to be settled through the sale of company assets by the end of 2026, with the expectation that they will be paid in full, up to the statutory cap of 150 minimum wages.

Dias Carneiro Advogados advised Cargill, and ASBZ advised Bradesco. Santos Neto Advogados advised Sumitomo, Banco BNP Paribas Brasil, ING Bank and Sumitomo Mitsui Banking Corporation. Ricardo Amorim advised Scotiabank Brasil – Banco Múltiplo and The Bank of Nova Scotia, while Galdino Advogados advised the labour creditors.

In the second quarter of 2026, Paranapanema reported net revenue of R$ 169.2 million, up 18.6% from the same quarter of 2025. EBIT was positive at R$ 47.2 million, the company’s first positive EBIT in five years. The figure includes a non-recurring reversal of a contingency provision of R$ 100.5 million. The accounting effects of the transaction are not reflected in the quarterly information for the period ended June 30, 2026.

Paranapanema stressed that its judicial recovery remains ongoing and that fully resolving its capital structure still involves challenges. The company noted that copper is classified among the critical and strategic minerals under Brazilian mineral policy, and that it holds primary copper refining and processing assets in the country.