By Brazil Stock Guide – Raízen (RAIZ4) published today the full documentation for its out-of-court restructuring plan, putting a direct decision before the company’s creditors: choose one of the payment options offered under the plan or be automatically placed into the toughest alternative, which carries an 80% haircut and a single payment only on March 31, 2047.
The restructuring covers R$65.4 billion in debt, including debentures, agribusiness receivables certificates known as CRAs, and other financial claims subject to the plan. Of that total, about R$12.1 billion is linked to debentures and CRAs, instruments that in many cases reached retail investors.
For creditors, the key issue is not only the size of the debt or the conversion of part of the claims into equity. It is the mechanics of the election process. The full plan states that subject creditors who do not make a valid election, in accordance with the election materials, will automatically be treated as Option B creditors.
That option provides for a cash payment with an 80% discount on the total amount of the claim subject to restructuring. In simple terms, a creditor with R$100,000 to receive from Raízen who does not make a valid election could be placed into that alternative and become entitled to receive R$20,000 in a single payment in 2047. The example is purely illustrative and does not take into account specific effects related to indexation, taxes, costs, accrued interest, the form in which the security is held, or any potential early payment.
The central alternative in the plan is Option A. Under this route, 55% of the total restructured debt would be converted into new debt instruments, allocated between Raízen Combustíveis and Raízen Energia. The remaining 45% would be converted into units of the company, each composed of one common share and one preferred share, at a conversion price of R$0.25 per share.
Using the same R$100,000 example, Option A would mean, in simplified terms, keeping R$55,000 in new debt instruments and converting R$45,000 into Raízen units. This option preserves some exposure to a potential recovery in the value of the restructured company, but also leaves the creditor exposed to execution risk, share liquidity and the company’s future performance.
There is also Option C, designed as a limited cash exit for smaller creditors. It provides for a cash payment equal to the lower of 75% of the claim or R$9,750, subject to an aggregate cap of R$150 million. If demand exceeds that limit, the allocation will be made progressively, prioritizing creditors with smaller claims.
Another point creditors need to understand is who actually makes the election. The plan provides that holders of local debentures may elect individually and independently, directly or through a representative, provided they give prior notice to the fiduciary agent. In the case of CRAs, the payment option will be elected by the securitization company, in a way that is binding on holders of the securities, according to the original documents and applicable law.
Shell is also central to the capital structure. The plan provides for a R$3.5 billion capital injection at closing, at the same price of R$0.25 per share. There is also a potential additional R$500 million contribution by a vehicle linked to Aguassanta, which could lift the new money from shareholders to as much as R$4 billion.
Part of these terms had already appeared in the blowout material released in May, including the existence of Option B, the 80% discount and the 2047 maturity. The difference now is that the full plan formalizes the consequence of inaction: creditors who do not make a valid election may be automatically moved into that alternative.
The structure creates a strong economic incentive for creditors to act. A creditor who does nothing does not preserve the original position. On the contrary, that creditor may be moved into the option with the largest nominal loss and the longest payment horizon.
For Raízen, the structure increases the chances of organizing the process and reducing dispersion among creditors. For holders of the company’s debt securities, the message is tougher: choosing an option has become an essential part of any attempt to recover value.
In this case, silence may cost 80%.
Leave a Reply