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Raizen Faces Creditor Revolt Over Breakup Plan
27 Feb
Summary
- Raizen reported a quarterly net loss of 15.6 billion reais ($3 billion).
- Creditors resist a proposal to split the company into two parts.
- The company requires over 20 billion reais in fresh capital to operate.
A proposal to divide Brazil's prominent sugar and ethanol producer, Raizen, is encountering substantial opposition from its creditors. This development comes as the company grapples with severe financial challenges.
Raizen, a joint venture involving Shell and Cosan, has reported a significant quarterly net loss amounting to 15.6 billion reais, equivalent to $3 billion. The company has also issued a stark warning about considerable uncertainty regarding its ongoing operational capacity.
Sources indicate that BTG Pactual proposed splitting Raizen into two distinct entities: one for fuel distribution and another for refineries and associated assets. This would allow the fuel distribution segment to potentially receive new capital injections from the bank. However, creditors are reportedly against this division, preferring to keep the company unified to facilitate a swifter recovery.
These creditors are advocating for shareholders to commit maximum fresh capital to Raizen. The company's financial distress has even drawn the attention of President Luiz Inacio Lula da Silva, who has discussed Raizen's situation with officials from BNDES and Petrobras. Raizen's net debt had climbed to 55.3 billion reais by the end of December, influenced by extensive investments, adverse weather conditions, and wildfires that impacted harvests.
