<ul>
<li>Creditors, shareholders near deal to convert up to 50% of Raizen debt into equity</li>
<li>Shell offers 3.5 billion reais bailout, Cosan faces own debt, Ometto’s chairmanship uncertain</li>
<li>Raizen negotiating Argentina asset sale to Mercuria for $1 billion-1.5 billion, use of proceeds debated</li>
</ul>
By Oliver Griffin and Luciana Magalhaes
SAO PAULO, May 11 (Reuters) - Talks between creditors and shareholders of Brazilian sugar and ethanol producer Raizen (RAIZ.SA) are advancing to avoid court restructuring and are homing in on the company’s governance structure, alongside other key issues, three people familiar with the matter said.
Negotiations to keep debt-stricken Raizen’s restructuring out of court officially began in April and must conclude near mid-June. Creditors and shareholders are nearing an agreement to convert 45% to 50% of the company’s debt into shares, a move that will significantly dilute the stakes of joint-venture partners Shell (SHEL.L) and Cosan (CSAN3.SA) , and potentially reshape the composition of Raizen’s board, two of the people said. In March, Raizen announced it had reached an out-of-court agreement to restructure about 65 billion reais ($13.3 billion) in debt, with a 90-day window to secure sufficient support for final approval, after which the new payment terms would apply to 100% of the covered claims.
Raizen and Shell declined to comment on the debt conversion negotiations.
Shell reiterated its proposal to inject 3.5 billion reais into bailing out Raizen, adding that it will continue to work closely with the sugar maker’s leadership and creditors to ensure the long-term future of the business. Creditors will likely not be able to push Shell to contribute more than the 3.5 billion reais it has already put on the table, one of the people said, citing the impact of a 12% export tax on oil which Brazil’s government declared to cushion consumers from surging oil prices due to the conflict in the Middle East.
Two of the parties, who asked not to be named because the negotiations are private, said they believe a deal will be reached before the deadline, but acknowledged that some issues remain unresolved.
<h3>CHAIRMAN’S ROLE IN QUESTION</h3>
One pending issue concerns the future of Raizen’s current chairman, Rubens Ometto, who is injecting 500 million reais to support the restructuring, far less than Shell, which is contributing 3.5 billion reais. Cosan, which last week raised fresh capital through a 3.2 billion-real initial public offering of its gas subsidiary Compass, is dealing with its own debt issues and will not use the proceedings to pay toward bailing out Raizen, one of the sources said.
Cosan declined to comment.
“Will it make sense that Ometto continues as chairman after the company’s reorganization? We don’t know yet,” said one of the people.
Ometto declined to comment.
<h3>SALE OF ARGENTINA ASSETS</h3>
Raizen is also in talks to sell a refinery and hundreds of gas stations in Argentina to Mercuria Energy Group, a Swiss-founded energy and commodities trader, in a deal seen fetching between $1 billion and $1.5 billion, one of the sources said.
The transaction would likely be announced only when the financial restructuring talks are finalized, reducing the buyer’s risk, the person said.
Creditors and shareholders are also discussing whether proceedings from the deal in Argentina will be used to reduce debt or to reinforce Raizen’s cash position, a second person said.
Mercuria did not reply to requests for comment. One of the sources said several factors helped move the negotiations forward, including international interest in fuel distribution in Brazil, a police crackdown on organized crime at gasoline stations, and the fact that Raizen’s difficulties stemmed from weather-related issues compounded by high interest rates.
($1 = 4.89 Brazilian reais)

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Reuters

Brazil’s Raizen debt talks advance as parties near equity conversion consensus