Raízen Lenders to Demand Management Changes in Counteroffer
(Bloomberg) -- Raízen SA and its creditors are working on a new restructuring proposal for the company’s 65 billion reais ($12.5 billion) debt load following a week of high-stakes meetings in New York, according to people familiar with the matter.
Creditors want more of a say in how the Brazilian biofuels giant is managed, given they are poised to become significant stockholders through a potential debt-for-equity swap, the people said, asking not to be identified because the discussions are private.
During the meetings, controlling shareholders Shell Plc and Cosan SA resisted a push from debtholders that they commit to injecting more money into Raízen, the people said. London-based company Shell agreed in March to inject 3.5 billion reais during the restructuring, while Cosan founder Rubens Ometto committed to put in 500 million reais. The new proposal request was reported earlier by newspaper O Estado de S. Paulo.
Negotiations are expected to continue in the coming days as the parties race to finalize a plan that can secure support from a majority of bondholders and banks, the people said. While a counterproposal from creditors is expected to come in the next week, there is no formal deadline for the plan, and structures may still change, the people added. The parties are up against a legal deadline of June 6 to come up with an out-of-court settlement.
The push for governance changes also reflects deepening lender discomfort with Raízen’s performance. The joint venture, created in 2011, has been hammered by high interest rates, large investments that have yet to pay off and operational hurdles in its sugar and ethanol divisions, leading to a string of earnings misses.
Raízen, Cosan and Shell declined to comment.
The New York meetings follow Raízen’s move to seek an extrajudicial restructuring, a step aimed at protecting cash flow during negotiations. Both the company and its creditors agree that an out-of-court solution is preferable to a full bankruptcy filing, the people added.
Debt traders have soured on Brazilian corporate debt after being hit with a string of bad news. Raízen and supermarket chain Cia. Brasileira de Distribuição both began out-of-court restructurings in the past month, and Alliança Saúde e Participações SA is seeking temporary court protection from creditors. Other companies like Braskem SA, HIG’s Kora Saúde and Oncoclinicas do Brasil Servicos Medicos SA are also weighing restructuring measures, people familiar with the matter have said.
(Updates to include Shell comment in sixth paragraph.)
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