Raizen owners end talks to rescue struggling sugar producer, source says

Raizen Capital Rescue Talks Collapse Amid Disagreements Between Owners

Breakdown of Rescue Negotiations and Financial Implications

By Stephanie Kelly and Abu Sultan

Failed Capital Injection Plan

LONDON, March 3 (Reuters) - Talks to rescue Brazilian sugar and ethanol producer Raizen have collapsed after co-owners Cosan and Shell failed to agree to a plan to raise capital, a person familiar with the matter said. 

Shell’s Commitment and Expectations

On Tuesday, Shell's Brazil CEO said the company was committed to investing 3.5 billion reais ($662.75 million) in the world's largest sugar producer and that it also expected another shareholder to be able to contribute an additional 3.5 billion reais.

With the talks now concluded, Shell still aims to proceed with the capital injection and support Raizen in continued discussions with banks and creditors, the source said.

Proposed Contributions by Stakeholders

During talks, Shell had suggested it would commit 3.5 billion reais, Cosan 1 billion reais and Brazilian billionaire and Raizen chairman Rubens Ometto 0.5 billion reais, the source said.

Shell and Cosan, an industrial conglomerate built by Ometto, each own 44% of Raizen.

Raizen and Cosan did not immediately respond to Reuters requests for comment.

Financial Struggles and Uncertainty

Raizen has reported a string of losses and soaring net debt in recent quarters as a result of costly investments and poor weather negatively impacting crops, prompting its warning in February of "significant uncertainty" about its ability to keep operating.

Valor Economico and Bloomberg News earlier reported the development. 

Disagreements Among Owners and Investors

Cosan said it could not match the financial support Shell had agreed to offer Raizen, while some of Cosan's other proposals were rejected by Shell, the Bloomberg report said, citing a source.

Private equity funds managed by Banco BTG Pactual, also involved in the talks, disagreed with several terms proposed by Shell and decided against injecting money into Raizen, the report said.

Mounting Debt and Operational Challenges

Raizen's net debt climbed to 55.3 billion reais by the end of December due to a combination of heavy investments, erratic weather and wildfires, which led to weaker harvests and lower crushing volumes.

($1 = 5.2810 reais)

Reporting and Editorial Credits

(Reporting by Stephanie Kelly and Abu Sultan in Bengaluru; Editing by Sonia Cheema, Subhranshu Sahu and Tomasz Janowski)