By Luciana Magalhaes
SAO PAULO, March 11 (Reuters) – Brazilian sugar and ethanol producer Raizen said on Wednesday it had reached an out-of-court agreement with creditors and bondholders to restructure approximately 65.1 billion reais ($12.61 billion) in debt obligations.
The joint venture between oil major Shell and Brazilian conglomerate Cosan had been in months-long talks seeking ways to strengthen its capital structure and tackle its significant debt burden.
Raizen said in a securities filing that creditors holding 47% of its unsecured debt had already endorsed the plan. The company will have 90 days to gain sufficient support for final approval, after which the new payment terms will apply to 100% of the covered claims.
Raizen’s shares fell as much 17% in early trading on Wednesday before recovering some ground, though they remained volatile.
DEBT CRISIS THREATENED ABILITY TO CONTINUE OPERATING
The world’s largest sugar producer, Raizen had been facing mounting pressure due to a combination of elevated capital expenditures, unfavorable weather, and wildfires that damaged harvests and reduced cane-crushing volumes.
It signaled last week that it could pursue an out-of-court restructuring to resolve its debt crisis, which had previously led the company to flag “significant uncertainty” about its ability to continue operations.
Raizen’s reorganization is the largest ever out-of-court restructuring in Brazil, according to Luiz Fabiano Saragiotto, chairman of the board of TMA Brasil, the Brazilian chapter of the global non-profit focused on corporate restructuring.
Saragiotto said Raizen’s move is “more a positive step toward a definitive solution than a concern about the company’s operations.”
A Shell spokesperson said it supported the reorganization, adding it was necessary to address Raizen’s significant financial challenges.
Shell has proposed injecting 3.5 billion reais to support Raizen.
Cosan said in a regulatory filing that the restructuring has no impact on Cosan’s obligations, operations, capital structure, or financial position. Its own activities and commercial relationships remain unchanged, it said.
According to Raizen’s Wednesday’s filing, the restructuring plan could involve shareholder capitalization, the conversion of part of its outstanding credits into equity, new debt issuances, and asset sales.
Raizen said the agreement does not affect obligations towards customers, suppliers, distributors or other commercial partners, and that operations would continue to run normally.
($1 = 5.1639 reais)
(Reporting by Luciana Magalhaes; additional reporting by Stephanie Kelly; Editing by Gabriel Araujo, Pooja Desai and Joe Bavier)
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