By Brazil Stock Guide – Cosan SA (CSAN3 BZ), Shell Plc (SHEL LN) and Banco BTG Pactual SA (BPAC11 BZ) are in advanced negotiations to inject fresh capital into Raízen SA (RAIZ4 BZ), their Brazilian sugar and ethanol joint venture, according to people familiar with the matter.
The talks, reported by Folha de S.Paulo, center on a plan to be presented to key creditors and bondholders before being finalized. The proposal includes a potential investment of about 5.5 billion reais by private equity funds managed by BTG Pactual, the people said, requesting anonymity because the discussions are private.
Under the structure being discussed, BTG-backed funds would acquire a significant stake in Raízen’s fuel distribution business. The negotiations also involve converting roughly 35% of the company’s debt into equity, the people said, though final terms remain under debate.
Raízen has been under financial pressure amid elevated interest rates, weaker-than-expected harvests and a series of large investments that have yet to generate meaningful returns. The deterioration in its financial profile led to credit rating downgrades and a selloff in its bonds.
The broader plan includes a capital increase of between 3 billion reais and 5 billion reais from existing shareholders. Shell could contribute between 1.5 billion reais and 3.5 billion reais, depending on future royalty arrangements, the people said. Cosan may inject 1 billion reais, while billionaire founder Rubens Ometto is expected to add 500 million reais and is seeking financing to support the transaction.
A corporate reorganization is also under consideration. The proposal would separate Raízen Energia, which focuses on sugar and ethanol production, from the fuel distribution arm targeted by BTG’s investment. Part of the debt currently allocated to Raízen Energia would be transferred to the distribution unit, aligning liabilities with the business that generates stronger cash flow.
The potential agreement may also include share offerings to provide an exit for creditors and bondholders, as well as asset disposals. Final figures and key terms have yet to be defined, and the deal depends on creditor approval. A meeting with creditors and bondholders is scheduled for this week, the people said.
A Shell spokesperson said the company’s “priority is to ensure that Raízen identifies and pursues solutions that are sustainable for the JV, for shareholders and for the company’s other stakeholders,” adding that Shell is constructively engaged in seeking a viable agreement. Cosan, Raízen, BTG and Ometto declined to comment.
BTG Pactual Holding SA, the investment vehicle of the bank’s partners, invested 4.5 billion reais in Cosan in a capital increase last year. While Ometto retains 50.01% of voting rights through Aguassanta, BTG partners became the largest overall shareholders after the transaction, holding nearly 25%.
Separately, Cosan said Monday (23) it is evaluating a potential initial public offering of Compass Gás e Energia. Raízen has also been divesting assets. Earlier this month, people familiar with the matter said Mercuria Energy Group was close to acquiring a refinery and hundreds of service stations in Argentina from Raízen for about $1 billion.
According to an estimate published late last year by UBS BB, Raízen would need between 20 billion reais and 25 billion reais in fresh capital to stabilize its balance sheet. Negotiations to secure funding have dragged on for months, fueling volatility in its bonds. Bloomberg reported earlier this year that the company and its advisers were assessing scenarios that included applying a haircut to debt as part of a restructuring.
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