Brazil's Raizen secures creditor support for $12.5 billion debt deal

Brazil's embattled Sugar and ethanol Producer?Raizen RAIZ4.SA said that it had secured enough backing from a number of?creditors, bondholders and other stakeholders to proceed with a restructuring out-of court totaling a?approximately?65 billion reais (12.57 billion dollars),?the biggest recorded restructurement in the country.

In a statement issued late Friday night, the joint venture company between Shell (SHEL.L), an oil major, and Brazil's Cosan, a Brazilian firm, said that creditors who held more than 75% the unsecured debt covered by the restructuring agreement had signed on to the plan. This meant they met the legal threshold.

The plan offers creditors three ways to settle their claims. They can either take on new debt instruments, or convert a portion of the money they owe into equity in the company.

Bloomberg was the first to report on this deal.

In the equity option, the remaining 45% will be converted to Units. Each Unit is composed of one Raizen common share and a Raizen preferred share. The Units are priced at 0.50 reals or 0.25 reals each share. The remainder 55% of the debt will be converted into new instruments.

Shell has committed to 3.5 billion reais of new capital. Chairman Rubens' Ometto could contribute 500 million more reais through Aguassanta, if that is what he chooses. Both parties would get common shares as a result.

Shell's spokesperson stated in a press release that the company supports the agreement, and that this keeps Shell on the Raizen Board.

The statement said that "we will continue to work with Raizen’s management team, creditors and other stakeholders in order to support the implementation of the plan as well as?the sustainability of the long-term company."

Raizen's collapse occurred after it invested aggressively in second generation ethanol plants and projects for renewable energy. However, the company was surprised by lower-than-expected harvests of sugarcane, high interest rates, and capital-intensive expansions that?ultimately failed and crushed its cashflow.

(source: Reuters)