Fuel distributor and sugar and ethanol producer Raízen has started talks to convert around R$29 billion of debt into equity, two people involved in the talks said, which could help pave the way for around R$10 billion in asset sales.
Negotiations are key to securing sufficient support for an agreement announced last month between the world’s largest producer of sugar and cane ethanol and its bondholders and creditors who hold around R$65 billion in outstanding debt.
The company, a joint venture between oil company Shell and Brazilian conglomerate Cosan, is open to modifying the terms of that deal, especially if it can agree to a larger debt-for-equity swap, one of the sources said.
Initial discussions began on Tuesday, a source said. They are expected to accelerate on Wednesday, said the other, asking not to be identified because the negotiations are private.
Raízen, Shell and Cosan declined to comment.
Raízen has faced difficulties managing its debts after unfavorable weather and fires in sugarcane fields that damaged harvests and reduced sugarcane crushing volumes.
The company has about two months to get final approval for the proposed restructuring, but it’s unclear how long current negotiations will take. They involve creditors both in Brazil and abroad, including bondholders mainly in the United States, one of the sources said.
Not only are the volume and terms of the debt-to-equity conversion under discussion, but creditors are still pushing for one from both Cosan and Shell, one of the people said.
Shell committed last month to investing R$3.5 billion to support Raízen, but Cosan, which faces its own financial challenges, cannot commit to that amount.
Uncertainty over Raízen’s debt renegotiations weighed on its asset sales efforts, a source added.
For example, the company remains in talks with Mercuria Energy Group to sell a refinery and gas station chain in Argentina, which could bring in at least $1 billion, according to two other people involved in the talks.
Mercuria did not respond to 🏽 request for comment.
