(Bloomberg) — Raízen SA () sent an alternative proposal to creditors as it tries to agree the terms of a R$65 billion ($13 billion) debt restructuring, according to people familiar with the matter.
In the proposal presented on Saturday night, Raízen informed creditors that it is in talks to raise between R$2.5 billion and R$5 billion in new capital, the sources said. Although this new detail should please debt holders, who had proposed that current shareholders inject R$8 billion, the company rejected other changes requested by creditors, including giving up control of the board of directors.
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The capital included in Raízen’s new proposal would be in addition to the R$4 billion in resources that Shell Plc and billionaire Rubens Ometto have already committed to investing in the bioenergy company, said the people, who requested anonymity because they are private negotiations. It was unclear where the new money would come from. Cosan SA, the conglomerate founded by Ometto and which shares control of Raízen with Shell, is not injecting capital into the company in difficulty.
Raízen is resisting demands from creditors that shareholders give up a majority of board seats or that executives be held responsible for any liabilities that may arise in the future, the people said. The company, however, accepted a request to create a committee of creditors to monitor governance more closely, one of them said.
Ometto still wants to remain chairman of Raízen’s board, although the company knows this will be a point of tension with debt holders, according to sources. Creditor banks and bondholders separately requested Ometto’s departure in their proposals, as Bloomberg previously reported.
Raízen, Cosan and Ometto declined to comment. Shell did not respond to a request for comment made outside business hours.
The company reiterated its proposal for creditors to receive a 70% stake in an eventual debt-to-equity conversion, the people said. The company’s new offer does not include the suggestion from creditor banks that 30% of the resources obtained from the sale of assets in Argentina be used to pay off debt, one of them said.
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Raízen has been negotiating with creditors to reach an agreement and avoid having to file for judicial recovery since it filed for extrajudicial recovery in March. The parties face a legal deadline of June 6 to reach an out-of-court settlement with sufficient support from bondholders and creditor banks.
Previously the leader in biofuels in Brazil, Raízen was affected by high interest rates, heavy investments that have not yet generated a return and operational challenges in the sugar and ethanol divisions, which led to a sequence of frustrated results. The problems eroded cash flow and caused leverage to soar. As negotiations between shareholders for a bailout dragged on, the company’s bonuses sank into stressed territory. When it hired advisors to optimize the capital structure, the rating agencies downgraded the rating from investment grade to deep speculation levels (junk), further expanding the liquidation of securities.
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