By Brazil Stock Guide – Raízen SA is proposing a debt restructuring that could significantly reshape its ownership structure, potentially handing creditors a controlling stake in the company.
The plan involves converting at least 45% of its debt into equity, which could leave creditors holding as much as 70% of the voting shares, depending on final pricing. The shares are being discussed at around 40 cents, below the current trading level of roughly 50 cents.
Talks are expected to take place in New York next week as the company seeks broader agreement from lenders. The proposal is designed to reduce leverage from about 5.3 times Ebitda to a range between 3 and 3.5 times, easing pressure on the balance sheet.
The restructuring could also pave the way for a separation between Raízen’s sugar and ethanol operations and its fuel distribution business. Under the proposal, the sugar and ethanol unit would have eight years before beginning principal repayments, while the fuel distribution segment would have five years.
Governance would also shift under the plan. Creditors could appoint three of seven board members, while Shell Plc (SHEL) would retain the right to nominate the remaining four. Cosan SA (CSAN3), which shares control of Raízen with Shell, has not commented on the proposal.
The company recently initiated an out-of-court restructuring of roughly R$65 billion ($12.6 billion) in debt, with creditors representing about 47% of that total agreeing to negotiations.
As part of the broader effort to stabilize the company, Shell has agreed to inject R$3.5 billion. Cosan’s founder Rubens Ometto has also committed an additional R$500 million and is seeking to remain chairman for an extended period, while advocating for the inclusion of a poison pill provision.
Raízen, once one of Brazil’s leading biofuel producers, has been under pressure from high interest rates, weaker harvests and heavy capital expenditures that have yet to deliver returns. The strain has reduced cash flow and increased debt, pushing its bonds into distressed territory.
Credit rating agencies have downgraded the company from investment grade to deep speculative levels, compounding investor losses and underscoring the urgency of the restructuring.
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