Brazilian sugar and ethanol producer Raízen has secured a $1.6 billion (8.5 billion reais) reduction in its federal tax liabilities, clearing a key obstacle to its multibillion-dollar out-of-court debt restructuring.
The company said Wednesday it reached an agreement with Brazil’s National Treasury Attorney General’s Office (PGFN) to settle 16.7 billion reais ($3.1 billion) in tax debt. After the discount, Raízen will extinguish the remaining 8.2 billion reais ($1.5 billion) by offsetting 5.7 billion reais ($1.1 billion) in tax losses and making an upfront payment of 2.5 billion reais ($469 million).
The agreement also covers an additional 5.7 billion reais ($1.1 billion) in tax liabilities for which Raízen’s controlling shareholders bear ultimate responsibility, bringing the total federal tax exposure addressed by the deal to 22.4 billion reais ($4.2 billion).
Raízen did not explain how those additional liabilities would be settled.
The company is jointly controlled by Brazilian conglomerate Cosan, led by billionaire Rubens Ometto, and energy major Shell. Each holds 44% of Raízen’s total equity and 50% of its voting shares.
In a regulatory filing, Raízen said the tax settlement marks a significant step toward implementing its out-of-court restructuring plan, as resolving the liabilities was one of the conditions precedent to its broader financial overhaul.
Shareholders are scheduled to meet at an extraordinary general meeting on Friday, Oct. 30, to vote on the next steps of the restructuring.
Restructuring Progress
Raízen filed for an out-of-court debt restructuring in March, seeking to renegotiate 65.1 billion reais ($12.2 billion) in liabilities. The initial proposal had the backing of creditors holding more than 47% of the financial debt covered by the plan.
A Brazilian court subsequently granted the company a 180-day suspension of payment obligations covering principal, interest and related charges.
In May, Raízen disclosed the proposed restructuring terms, including a capital injection led by Shell, later estimated at 3.5 billion reais ($656 million), a partial debt-to-equity conversion and a separation of its energy and fuel businesses.
The court approved the restructuring plan in July, after creditors representing 81.6% of the covered claims agreed to its terms. The debt included in the plan had been revised to 61.4 billion reais ($11.5 billion) at the time.
Raízen has also been selling assets to reduce leverage. In July, the company sold its Caarapó sugar and ethanol mill to Adecoagro for 760 million reais ($142 million).
The company has a market capitalization of approximately 3.41 billion reais ($639 million). Its shares (RAIZ4) have fallen 66.67% over the past 12 months.
This story was translated from the original Portuguese with the assistance of artificial intelligence and reviewed by The AgriBiz editorial staff.
