Unigel’s 8.75% dollar bond due 2026 has dropped to distressed levels over the past week. The bond was trading at 91 cents on the dollar in mid-May and is currently at 49.5. Unigel is Brazil’s largest nitrogen fertilizer producer and witnessed an 82% EBITDA drop in 1Q 2023. With this, its its leverage ratio hit 2.2x and thus moved closer to a threshold of 3.5x. As per the bond’s covenants, if the 3.5x threshold is exceeded, bondholders of its local notes issued in 2022 have the option of accelerating early maturity payments of its debt obligations. Sebastian Hofmeister of Lucror Analytics said that Unigel expects a similar weak performance in Q2 with the management suggesting that they may require covenant waivers.

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