President Luiz Inácio Lula da Silva called, in recent weeks, a meeting with executives from large companies involved in negotiations to help Raízen (), a sugar and ethanol producer in financial difficulties. The gesture signals the government’s concern about the consequences if there is no agreement.
Participating in the meeting, according to people with knowledge of the matter, were the controllers of Raízen, Cosan and Banco BTG Pactual. Also present were the president of Petrobras, Magda Chambriard, the Minister of Finance, Fernando Haddad, and the president of the National Bank for Economic and Social Development (BNDES), Aloizio Mercadante. The sources requested anonymity when discussing private conversations.
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The meeting took place in Brasília before Carnival and before Lula’s trip to Asia, on February 18. Days later, Raízen formally sought financial support from its main shareholders after another quarter of weak results, and negotiations advanced to address high debt and liquidity concerns.
The Presidency did not comment. Cosan, Shell, Raízen, BNDES and Haddad did not comment. BTG did not respond to requests for comment. In a statement, Petrobras stated that Magda Chambriard did not participate in a meeting to discuss Raízen.
Growing concern
Lula’s involvement reflects the government’s growing concern about Raízen’s financial situation at a sensitive political moment, as the president seeks to reinforce investor confidence and economic growth amid his re-election bid. Raízen is one of the largest global producers of sugar and ethanol and a central player in Brazil’s biofuels sector, a strategic area for the government’s energy transition agenda.
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At the meeting, the possibility of selling Raízen’s strategic assets to Petrobras was discussed, according to one of the sources. The alternative did not advance, given alternative proposals being prepared by the company’s shareholders.
In a statement, Petrobras informed that it is not studying the acquisition of Raízen’s assets.
The company is looking for new resources after being pressured by high financing costs, lower-than-expected harvests and a series of aggressive investments that have not yet generated relevant returns. In recent months, agencies have downgraded the company’s credit ratings, and its bonds have declined in the market.
Even so, Raízen chose to pay interest on its dollar bonds maturing in 2037, according to sources. The company had $33.5 million in interest payments due this week related to those securities, according to data compiled by Bloomberg. The disbursement, however, represents another impact on the balance sheet.
Since the meeting in Brasília, negotiations have intensified. BTG and Shell presented proposals, and new conversations took place in London and São Paulo, according to the sources. Discussions include possible capital contributions and other measures to stabilize Raízen’s balance sheet.
Separately, Cosan approached BNDES, chaired by Mercadante, in search of financial support for Raízen, according to some of the sources. The proposal faces resistance within the development bank, according to another person, with technicians fearful of expanding exposure to the group amid the deterioration of the company’s credit profile. Members of the economic team also stated that, before any help from BNDES, the company needs to present a concrete and structured capitalization plan.
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BNDES has already invested R$409 million in Cosan’s share offering, part of a R$10 billion fundraising led by BTG Pactual Holding and Perfin Infra at the end of last year.
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