Dreyfus’s Brazil Sugar Unit Said to Weigh Equity Offering

(Bloomberg) -- Louis Dreyfus Co.’s Sao Paulo-based unit Biosev SA, the world’s second-largest sugar producer, is weighing options including a follow-on equity offering of as much as 2 billion reais ($620 million) to trim debt, according to two people with direct knowledge of the matter.

Biosev is adjusting its corporate structure with a goal of either filing for the equity offering as soon as there’s an opportune time, selling a stake in the company or issuing bonds, said the people, who asked not to be identified because a decision isn’t public yet. Biosev, which has 11 agro-industrial units in Brazil producing sugar and ethanol, declined to comment.

An equity offering would be the most obvious choice given that the company struggled to drum up demand when it met with bond investors late last year, said one of the people. Brazilian sugar companies have fallen out of favor in recent years after low prices for the sweetener and ethanol led to bond defaults by producers including Virgolino de Oliveira and Aralco.

The amount of shares Biosev may look to sell would be almost three times the 700 million reais it raised in its IPO more than three years ago. At that time, investors bought stock in the Brazilian sugar and ethanol producer for 15 reais a share and had the chance to purchase a put option that allowed them to recoup their money, plus interest, if the stock dropped. In the following months, the shares sank as much as 50 percent and Amsterdam-based Dreyfus had to repurchase the shares, repaying all the money Biosev raised in the IPO. The 165-year-old commodity trading company is controlled by billionaire Margarita Louis-Dreyfus through a family trust set up by her late husband Robert Louis-Dreyfus.

Since its IPO, Biosev’s shares have fallen almost 50 percent, compared with a 16 percent gain for Brazil’s benchmark equity index. Biosev declined 1.5 percent to 7.70 reais at 12:08 p.m. in Sao Paulo.

Still, prices for the sweetener in reais have risen 85 percent in that same span. The company reported that as of Sept. 30 its leverage fell to 3 times its adjusted earnings from 4.2 times a year ago. The company also said it generated record free cash flow.

--With assistance from Gerson Freitas Jr.

To contact the reporters on this story:
Paula Sambo in Sao Paulo at psambo@bloomberg.net
Fabiana Batista in Sao Paulo at fbatista6@bloomberg.net

To contact the editors responsible for this story:
Arie Shapira at ashapira3@bloomberg.net
Lester Pimentel, Brendan Walsh