Brazilian sugar giant Raízen launches $12.6 billion debt restructuring, with BNP Paribas holding $800 million, the largest stake.

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The Brazilian sugar and ethanol producer Raízen has reached a key breakthrough in its out-of-court debt restructuring process, as the debt exposures of multiple international and domestic financial institutions have come to light.

According to documents released by Raízen on Wednesday, BNP Paribas, Banco Bradesco SA of Brazil, and Coöperatieve Rabobank of the Netherlands are among the company’s largest creditors.

Raízen has agreed to launch an out-of-court debt restructuring process, involving about 65 billion reais (approximately US$12.6 billion) in debt, and suspend repayments, giving itself 90 days to win creditor support for a more comprehensive restructuring plan.

The restructuring plan may involve additional capital injections by shareholders, partial debt-to-equity swaps, or asset sales, among various options.

Raízen is jointly owned by Shell and Cosan SA. The disclosure of creditor lists has provided clearer insight into the scale of risk assumed by financial institutions during this major debt crisis.

BNP Paribas Has Largest Debt Exposure; Several Banks Hold Over 2 Billion Reais Each

According to documents disclosed by Raízen, when converted to local currency, BNP Paribas, headquartered in Paris, holds approximately 4.2 billion reais (about US$810 million) in claims, making it the largest known single bank creditor.

Banco Bradesco SA, Banco Santander SA of Spain, Coöperatieve Rabobank, and Sumitomo Mitsui Banking Corp. of Japan each hold claims of around 2 billion reais (all calculated based on currency conversion).

Itau Unibanco Holding SA’s exposure to Raízen exceeds 1 billion reais. Itau Unibanco Holding SA is the largest private financial group in Brazil and the entire Southern Hemisphere.

The Bank of New York Mellon, acting as trustee, is listed in the documents as a creditor of assets equivalent to about 26 billion reais, but this figure typically reflects the size of assets managed by the bank as trustee on behalf of bondholders.

Securitization firm True Securitizadora is also among the biggest creditors, holding about 6.4 billion reais in claims. Securitization institutions handle structured agricultural receivables certificates (CRA), a relatively new fixed income security widely used to finance the boom in Brazilian agriculture.

Raízen’s Predicament

Raízen was once a leader in Brazil’s biofuels sector, but is now deep in financial trouble.

High interest rates, consecutive poor harvests, and large upfront investments that have not yet generated returns have jointly eroded the company’s ability to pay its debts.

The company’s U.S. dollar-denominated bonds have fallen to levels that generally indicate financial distress, and its credit rating has been downgraded deep into junk territory.

At the same time, market concerns about the scale of its debt are mounting, and negotiations around assistance from its major shareholders have dragged on, further intensifying investors’ worries about the company’s prospects.

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