Raizen creditors begin evaluating $12.8 billion debt restructuring

Creditors began Wednesday evaluating the final proposal of Brazilian sugar and alcohol producer Raizen for a restructuring agreement outside court to cover approximately USD 12.8 billion in debt. This is the largest deal ever done in Brazilian history.

The joint venture between Shell and Brazilian conglomerate Cosan aims to settle debts accumulated due to high capital expenditures, adverse weather conditions and wildfires which damaged sugarcane crop.

Raizen announced early on Wednesday morning that holders of local debentures (LD) and agribusiness Receivables Certificates (CRA) will meet later that day.

The Ibovespa Index was down by more than 2% on Wednesday.

According to documents released Wednesday, the company offered three options for repayment of creditors.

All options included an injection of Shell of 3.5 billion reais, and Raizen shareholder Rubens Ometto, Chairman, would have the option to inject 500 million reais more in the future. On Tuesday, it was reported that bondholders and creditors were working on finalizing terms. This included whether Ometto would be able to inject new capital at a future stage.

In the first scenario, Raizen proposed on Wednesday, the creditors could approve a plan that converts 45% of the debt to equity. The remaining 55% would be restructured into new debt.

The second option would be to reduce the debt by 80%, with a lump sum payment of the balance remaining due at the end March 2047.

The third proposal was to pay the lesser of 75% of each credit or 9,750 Reais per claim, up to a maximum of 150 Million Reais.

Documents also outline a proposal for separating sugarcane processing from fuel distribution with a?implementation date of the end of 2027. Raizen previously revealed a draft plan that included the conversion of 45% restructured debt to equity at 0.25 reals per share. This condition was maintained in the proposal of Wednesday. (Reporting and editing by Louise Heavens; Joe Bavier, Rod Nickel, Gabriel Araujo)

(source: Reuters)