By Stephanie Kelly and Abu Sultan LONDON, March 3 (Reuters) - Talks to rescue Brazilian sugar and ethanol producer Raizen have collapsed after co-owners Cosan and Shell failed to agree to a plan to
Raizen discusses $765 million injection, could seek out-of-court restructuring
By Luciana Magalhaes, Oliver Griffin and Stephanie Kelly
Raizen's Capital Injection Proposal and Debt Restructuring Efforts
Background of the Financial Crisis
SAO PAULO/LONDON, March 4 (Reuters) - Brazilian sugar and ethanol producer Raizen said on Wednesday it is analysing a proposal for a Shell-led 4 billion real ($765 million) capital injection, while indicating that a solution to its debt crisis could be implemented in an out-of-court restructuring process.
Raizen, a joint venture between Shell and Brazilian conglomerate Cosan, has been discussing with creditors and shareholders for months how to strengthen its capital structure and address billions of dollars of debt.
Details of the Capital Injection Proposal
In a securities filing, Raizen said the proposal currently under analysis includes a capital contribution of 3.5 billion reais from Shell, plus 500 million reais from an investment vehicle owned by the family of Rubens Ometto, Cosan's controlling shareholder.
Cosan's Position and Potential Dilution
Raizen, which said its financial restructuring process could also include a debt-to-equity swap and asset sales, did not mention any capital injection proposed by Cosan.
While Cosan has said it is prepared to contribute 1.5 billion reais - including the 500 million reais from Ometto - it is unable to match Shell's proposed investment, two sources told Reuters earlier on Wednesday.
An unmatched capital injection from Shell would dilute Cosan's stake, but the extent of the dilution would depend on how much debt is converted into equity in negotiations with creditors, another person said.
Shell's Perspective and Potential Control
A Shell spokesperson said the British oil major acknowledged the significant financial challenges facing Raizen. The spokesperson confirmed Shell was proposing to inject 3.5 billion reais to support Raizen and was working closely with its leadership team.
Raizen could end up under the control of Shell, sources said, after rescue talks between the joint venture partners and creditors collapsed this week.
Cosan declined to comment before the filing from Raizen.
Raizen's Financial Situation and Future Outlook
Recent Losses and Debt Accumulation
Raizen, one of the world's largest ethanol producers, has posted a string of losses and its debt has ballooned in recent quarters. In February, the world's top sugar producer warned of "significant uncertainty" over its ability to continue operating, prompting owners and creditors to scramble to shore up the company.
Plans for Restructuring and Negotiations
Raizen said in the filing that it intends to ensure a "protected and orderly environment" that allows discussions with financial creditors for a debt solution. The firm said the potential solution "may, if necessary, be implemented through an out-of-court restructuring process".
Net Debt and Contributing Factors
Raizen's net debt rose to 55.3 billion reais by the end of December due to a combination of elevated investment spending, erratic weather and wildfires that hurt harvests and reduced cane crushing volumes.
($1 = 5.2810 reais)
Reporting Credits
(Reporting by Luciana Magalhaes, Oliver Griffin and Andre Romani in Sao Paulo and Stephanie Kelly in London; Additional reporting by Abu Sultan; Editing by Sonia Cheema, Subhranshu Sahu, Tomasz Janowski and Tom Hogue)
