Raizen creditors begin evaluating $12.8 billion debt restructuring
Overview of Raizen's Debt Restructuring Proposal
By Gabriel Araujo, Luciana Magalhaes and Oliver Griffin
SAO PAULO, June 3 (Reuters) - Creditors of embattled Brazilian sugar and ethanol producer Raizen on Wednesday began evaluating the company's final proposal for an out-of-court restructuring agreement to cover approximately 65 billion reais ($12.8 billion) in debt, the largest such deal in Brazilian history.
Background and Causes of Debt
The joint venture between oil major Shell and Brazilian conglomerate Cosan wants to resolve debt accumulated as a result of high capital expenditures, adverse weather conditions, and wildfires that damaged sugarcane crops.
Creditor Meetings and Market Reaction
Raizen said early on Wednesday that holders of local debentures and agribusiness receivables certificates (CRA) would meet later in the day.
Raizen shares were up 5% on Wednesday afternoon, while the Ibovespa index was down more than 2%.
Details of the Restructuring Proposal
The company proposed three repayment alternatives for creditors, according to documents released on Wednesday.
Capital Injection and Shareholder Participation
In all options, the baseline included an injection of 3.5 billion reais from Shell, while Raizen shareholder and Chairman Rubens Ometto would retain the option to inject an additional 500 million reais in the future.
Reuters reported on Tuesday that creditors and bondholders were working to finalize terms, including whether Ometto could inject fresh capital at a later stage.
Repayment Alternatives
Scenario 1: Debt-to-Equity Conversion
Under the first scenario proposed by Raizen on Wednesday, creditors could support a plan to convert 45% of the company's debt into equity, with the remaining 55% restructured as new debt.
Scenario 2: Debt Reduction with Lump-Sum Payment
The second would include an 80% debt reduction, with a lump-sum payment of the remaining balance due by the end of March 2047.
Scenario 3: Payment Cap Option
The third proposed a payment of the lesser of either 75% of the respective credit or 9,750 reais per claim, subject to a financial cap of 150 million reais.
Additional Structural Proposals
The documents also outlined a proposal to separate sugarcane processing from fuel distribution, with an implementation deadline of end-2027.
Draft Plan and Equity Conversion Terms
Raizen had previously unveiled a draft plan, including the conversion of 45% of restructured debt into equity at 0.25 real per share, a condition maintained in Wednesday's proposal.
(Reporting by Gabriel Araujo; Editing by Louise Heavens, Joe Bavier, Rod Nickel)
