By Brazil Stock Guide – Brazilian asset manager IG4 Capital made a non-binding offer to buy credits held by Raízen SA creditors, as the sugar, ethanol and fuel distributor moves ahead with Brazil’s largest-ever out-of-court restructuring plan, Valor Econômico reported.
The proposal targets creditors that hold foreign debt securities, debentures and agribusiness receivables certificates, known as CRAs. IG4 aims to acquire 50% plus one of the credits that are expected to be converted into equity, a move that could give the firm control of Raízen after the financial restructuring.
Raízen, a joint venture between Cosan SA (CSAN3) and Shell Plc (SHEL), said Friday (June 12) that it had secured support from 80.1% of creditors for its out-of-court restructuring plan. The plan seeks to reorganize 64.7 billion reais in debt and would turn creditors into the company’s controlling shareholders.
Under the proposal, 45% of Raízen’s debt would be converted into shares at 0.25 reais per share, giving creditors more than 80% of the company. The remaining 55% of the debt would be rescheduled.
Shell is expected to inject 3.5 billion reais directly into Raízen, while Aguassanta, the holding company linked to Cosan controlling shareholder Rubens Ometto, may contribute another 500 million reais.
IG4’s challenge is to persuade a dispersed creditor base to join the transaction. The investors are spread across different types of debt instruments and geographies, according to people cited by Valor. If IG4 fails to secure at least 50% plus one of the credits to be converted into equity, the offer will not move forward.
The asset manager’s goal is to lead an orderly restructuring at Raízen, Valor reported. The company’s plan gives a six-month window for the conversion of 45% of the debt into shares, which would be the period available for IG4 to negotiate the acquisition of the credits.
A further step, if the transaction is completed, would be to take over Raízen’s sugar and ethanol business. Shell is not interested in the agribusiness assets and is focused instead on the fuel distribution operation, according to people cited by Valor.
Raízen’s restructuring plan includes splitting the company into two units: Raízen Combustíveis and Raízen Energia. The separation would divide the fuel distribution business from the energy, sugar and ethanol operations.
Raízen is Brazil’s largest sugar and ethanol producer. The company carried out heavy investments over the past decade to expand and diversify its business, but a combination of higher interest rates, multiple simultaneous projects and investments that failed to deliver expected returns, including second-generation ethanol, weakened its balance sheet.
The company has already sold at least 5 billion reais in assets. Two weeks ago, it reached an agreement to sell its Argentina operations for $1.42 billion to a consortium led by Swiss trading firm Mercuria Energy Group, a deal first reported by Valor. More assets are included in the divestment plan, according to the newspaper.
IG4’s move at Raízen resembles the transaction it carried out at Braskem SA (BRKM5). Through its Shine fund, managed by IG4, the firm recently took 50.1% of Braskem’s voting capital after an agreement with Novonor creditors, whose loans were backed by shares in the petrochemical company formerly held by Odebrecht.
Under a new shareholders’ agreement, IG4 and Petrobras (PETR3, PETR4) plan to lead a financial and operational restructuring at Braskem, which is also highly leveraged. Talks with Braskem creditors have already begun, and the goal is to restructure liabilities through an out-of-court process.
In Braskem’s case, the partners intend to pursue a plan more focused on extending maturities than imposing discounts, according to people cited by Valor.
IG4 declined to comment, Valor reported.