Rio de Janeiro’s electric company says so many people are stealing power in the city’s slums that it has been pushed into default, causing a massive selloff and attracting a veteran buyer of distressed Brazilian corporations, Bloomberg News reported. Light SA lost around $200 million last year from the illegal hookups, perched like a tangle of wire birds’ nests atop power poles across Rio’s favelas. That’s even after years of investment to prevent theft. The 120-year-old utility says it can’t keep absorbing the losses, which also include delinquencies and judicial costs. As a June deadline approaches, it is mulling walking away from its contract with the city, an unlikely and unprecedented move that has the potential of throwing Brazil’s second-largest city into an electricity-supply crisis. Light last year posted its worst results since at least 2006, as an economic slowdown reduced demand from large clients and increased delinquencies. Its debt levels soared due to higher interest rates. The company is now pressing the government to raise tariffs. Otherwise, it says, the business is unviable. It could use its holding company to file for bankruptcy protection, according to a person familiar with the matter. “Everybody was expecting the energy losses to decline, and that was a frustration,” said Lucas Rios, the primary analyst for Light at Fitch Ratings. If the holding company files for bankruptcy protection, “it’s going to be very difficult.” Already, the company won a court order allowing it to temporarily halt payments to financial creditors, which ratings firms, including S&P Global Markets, classified as a default. Its dollar bonds have handed investors losses of 55% this year, among the worst performers in Latin America.
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