Brazil's Raizen launches debt talks, eyeing asset sales

SAO PAULO, April ​8 (Reuters) - Brazil's ⁠fuel and sugar giant Raizen has begun ​talks to convert about 29 billion reais ($5.7 billion) of debt into shares, two people involved in negotiations said, which ​could ‌help clear the way for some 10 billion reais of asset sales.

The talks are key to ⁠securing enough support for an out-of-court agreement announced last month ⁠between the world's largest producer of ​sugar and cane-based ethanol and its bondholders and creditors holding about 65 billion reais of outstanding debt.

The company, a joint venture between oil major Shell and Brazilian conglomerate Cosan, is open to modifying the ​terms ‌of that agreement, especially if it can agree to a larger debt-for-equity swap, said one of the sources.

Initial discussions began on Tuesday, one source said. They are expected to accelerate on Wednesday, said the other, asking not to be named because the negotiations are private.

Raizen, ​Shell and Cosan declined to comment.

Raizen has struggled with managing its debts after a ‌period of heavy capital spending, unfavorable weather and wildfires that hurt harvests and reduced cane-crushing volumes.

The company has about two months to ‌gain final approval for the proposed restructuring, but it is unclear how long current talks will take. They involve creditors both in Brazil and abroad, including bondholders primarily in the United States, one ​of the sources said.

Not only are the volume and terms of the debt-to-equity conversion on the table, but ‌creditors are still pushing for a stronger capital injection from both Cosan and Shell, one of the people said. Shell committed last month to investing 3.5 billion reais to support Raizen, but Cosan, ⁠which faces ⁠its own financial challenges, is unable to commit as much.

Uncertainty ‌about Raizen's debt renegotiations has weighed on its asset sale efforts, a source added.

For example, the company remains in ​talks with Mercuria Energy ​Group to sell a refinery and network of gas stations ‌in Argentina, which could fetch at least $1 billion, according to two other people involved in the negotiations.

Mercuria did not respond to a request for comment.

Shell