Brazil's Raizen launches debt talks, eyeing asset sales

Two people involved in the negotiations say that Brazil's sugar and fuel giant Raizen has begun to discuss converting about 29 billion dollars of debt ($5.7 billion) into shares. This could clear the way for around 10 billion dollars worth of asset sales.

The talks will be crucial in securing the support needed for an agreement reached last month, between the largest producer of cane-based sugar and ethanol in Brazil and its bondholders.

One of the sources said that the company, which is a joint venture between the oil giant?Shell, and the Brazilian conglomerate Cosan was open to changing the terms of this agreement, particularly if they could agree on a larger swap of debt for equity.

?A source stated that initial discussions began on Tuesday. The negotiations are expected to intensify on Wednesday.

Cosan, Shell and Raizen declined to comment.

After a period of heavy capital expenditure, unfavorable conditions and wildfires which affected harvests and cane crushing volumes, Raizen struggled to manage its debts.

It is not clear how long the current discussions will last. One source said that the talks involve both Brazilian and foreign creditors, including bondholders in the United States.

One of the people stated that not only is the amount and terms of debt-to equity conversion on the table but also creditors continue to push for a larger capital injection by both Cosan, and Shell. Shell has committed to invest 3.5 billion reais in Raizen last month, but Cosan is not able to commit the same amount.

Sources say that uncertainty about Raizen’s debt renegotiations weighed down on the asset sale efforts.

Two other people involved in negotiations say that the company is still in talks with Mercuria Energy Group about selling a refinery in Argentina and a network of gas stations, which would fetch at least $1 billion.

Mercuria has not responded to a comment request.

(source: Reuters)