Raízen creditors pick board nominees as debt swap nears
Raízen’s creditors are shaping the company’s governance as part of its restructuring and have already picked their representatives for the boards of the two companies that will emerge from the split of its fuel operations and its sugar, ethanol, and bioenergy businesses, Valor has learned.
Meanwhile, the banks have failed to reach an agreement on how to transfer management of the equity stakes they will receive through the debt conversion to firms specializing in restructuring. For now, without a consensus, the prevailing expectation is that the shares will remain directly with the financial institutions, according to people familiar with the discussions.
Debt-to-equity swaps gain ground in Brazil’s corporate restructurings
Raízen posts R$1.6bn quarterly loss
The two moves are part of the implementation of Raízen’s out-of-court restructuring, the largest such process ever carried out in the Brazilian market.
The restructuring covers R$64.7 billion in financial and unsecured claims, and the courts approved its plan in late July after receiving support from holders of more than 80% of the claims subject to the restructuring.
On the governance front, creditors have selected Paulo Figueiredo, of Geribá Investimentos, and Samuel Aguirre, of FTI Consulting, to take seats on the board of Raízen Combustíveis, according to people familiar with the matter who spoke on condition of anonymity. FTI advised the creditor banks during negotiations with Raízen over the restructuring. For the sugar, ethanol, and bioenergy business, Nelson Oliveira, also of Geribá, and Mário Peixoto, of Makalu Partners, were selected, the people said.
The selection of creditor representatives is moving forward as lenders discuss how to manage the equity stakes they will receive in the company. Under the plan, 45% of the restructured debt will be converted into shares, while the remaining 55% will be rescheduled.
The transaction also includes a R$3.5 billion capital injection from Shell and the possibility of an additional R$500 million investment by Aguassanta, the holding company of Rubens Ometto, which has yet to be decided.
Following the conversion, creditor banks will directly own equity stakes in the companies resulting from the reorganization. During negotiations, the parties discussed a structure under which those stakes would be transferred to firms specializing in restructuring and the management of distressed assets, an arrangement that has become common in similar situations.
The proposal, however, divided the creditor group. Some banks, particularly Brazilian lenders, supported the structure, which would be designed to manage the stakes and work to increase the value of the assets. Participation would entail costs, however, and require creditors to accept a “lock-up” period, restricting their ability to sell the shares for a given period.
Other creditors opted to keep the freedom to sell their stakes immediately after the conversion, avoiding the costs of the structure and any liquidity restrictions. These banks could also benefit from any increase in the value of the assets resulting from work by restructuring firms hired by other creditors, without directly participating in the structure.
That created friction and ultimately prevented an agreement, people close to the discussions said. For now, therefore, the expectation is that the shares received through the conversion will remain directly with the banks, which will be able to decide individually whether to hold or sell their stakes.
Meanwhile, the secondary market for Raízen’s debt continues to attract investors specializing in restructurings and distressed assets. Special-situations funds remain active and, according to people familiar with the negotiations, major institutions have been buying the company’s debt in the secondary market to position themselves ahead of the conversion into equity.
Interest in the securities had already emerged during the negotiations. IG4 Capital submitted a proposal to buy claims from Raízen creditors and build a significant position following the conversion. Other asset managers also approached debt holders. As the claims continue to trade in the secondary market, the composition of the company’s future shareholder base could still change before the restructuring plan is fully implemented.
Once the transaction is completed, the businesses will be separated between Raízen Combustíveis and Raízen Energia, which will house the sugar, ethanol, and bioenergy operations. The structure calls for seven-member boards of directors, with four seats—including the chairmanship—to be appointed by supporting creditors and three by shareholders participating in the capital increase. Shell will have at least one board seat for as long as its brand licensing agreement remains in effect.
Aguassanta will be entitled to participate in the new governance structure if it makes the R$500 million investment contemplated in the agreement. If it does not provide the funds, it will lose the corresponding right to appoint a board member.
Before the debt conversion can take place, conditions set out in the plan still need to be met. The main one, according to people involved in the discussions, is the completion of a federal tax settlement involving about R$20 billion in Raízen’s tax liabilities. Negotiations have been progressing and include the use of tax credits arising from tax losses.
Although the timetable initially presented by Raízen called for the tax settlement to be completed by March 2027, creditors are working to complete the debt swap by year-end, according to sources. Bringing the process forward is also considered important given the transaction’s tax implications for the banks in fiscal 2026.
Raízen and Makalu declined to comment when contacted. FTI said it does not comment on specific companies. Geribá did not respond to a request for comment.
Raízen: restructuring covers R$64.7 billion in financial and unsecured claims
Victor Moriyama/Bloomberg
