Brazilian sugar and ethanol producer Raízensaid on Wednesday that it is examining a proposal for a Shell-led 4 billion real ($765 million) capital injection, while signifying that a solution to its debt crisis could be introduced in an out-of-court restructuring process.
Raízen, a joint venture between Shell and Brazilian conglomerate Cosan, has been negotiating with creditors and shareholders for months on how to bolster its capital structure and deal with billions of dollars of debt.
Raízentold a securities filing that the proposal that is being analyzed has a capital contribution of 3.5 billion reais by Shell, and 500 million reais by an investment vehicle owned by the family of Rubens Ometto, Cosan’s controlling shareholder.
Raízen, which had said that its financial restructuring process could involve a debt-to-equity swap and asset sales, did not refer to any capital injection offered by Cosan.
Two sources informed Reuters that although Cosan has indicated that it is ready to make a contribution of 1.5 billion reais and that it would contribute 500 million reais in Ometto, it cannot afford to make an investment comparable to that offered by Shell.
It was reported that a capital injection on the scale that Shell could offer would dilute Cosan’s stake, though the dilution would depend on the amount of debt that is turned into equity in bargaining with creditors.
Sources said that Raízenmight find itself in the hands of Shell, following the breakdown of rescue discussions between the joint venture partners and creditors this week.
Cosan refused to comment until after the filing by Raízenand Shell would not answer a request to comment immediately. Raízenis one of the largest ethanol producers in the world and has reported a series of losses, and its debt has swelled during the past few quarters.
The world’s top sugar producer cautioned of “significant uncertainty” over its ability in February to continue operating, prompting owners and creditors to scramble to shore up the company.
Raízensaid in the filing that it intends to provide a “protected and orderly environment” that enables discussions with financial creditors for a debt solution. The company said the potential solution “may, if necessary, be implemented through an out-of-court restructuring process.”
The net debt of Raízenincreased to 55.3 billion reais at the end of December because of a complex of high rates of investment spending, unpredictable weather, and wildfires that damaged harvests and lowered volumes of cane crushing.
