Raizen May Take On Up to Half of Biosev’s Debt in Dreyfus Deal

Raizen Energia SA is negotiating a plan to pay a large part of Biosev SA’s debt in order to acquire the sugar producer from Louis Dreyfus Holding BV, according to people familiar with the matter.

The deal would see Raizen, Brazil’s biggest sugar-cane processor, pay an amount equivalent to 40% to 50% of Biosev’s debt, which was at 7.6 billion reais ($1.4 billion) at the end of September, said the people, asking not to be named since the discussions are private. The rest of the debt would be paid by Dreyfus and a holding company created to receive dividends to pay creditors, the people said.

Raizen, a joint venture between Royal Dutch Shell Plc and Cosan SA, is planning to take out a new loan with lower interest rates and a longer maturity to pay down Biosev’s debt, one of the people said. While a final deal has yet to be signed, the companies submitted the proposed transaction to Brazil’s antitrust regulator, according to regulatory filings on Jan. 28.

The acquisition of Biosev would be Raizen’s biggest and may give it more power to negotiate cane prices with suppliers. For Dreyfus, the arrangement would resolve a long-running headache over Biosev’s debt, which had already forced the parent company to inject about $1 billion into the unit several years ago.

Years of sugar surpluses have depressed prices while gasoline price caps in Brazil reduced demand for ethanol made from cane. The company’s woes have been exacerbated by the plunge of the Brazilian real against the dollar.

Raizen and Biosev declined to comment. Dreyfus didn’t immediately respond outside of normal working hours.

Dreyfus is trying to raise cash as its owner seeks funds to pay down loans. Last year, the company controlled by billionaire Margarita Louis-Dreyfus agreed to sell a 45% stake to an Abu Dhabi sovereign wealth fund, opening the family business to outside ownership for the first time.

After the acquisition, Raizen could increase its sugar-cane processing volume by about 50% to almost 90 million metric tons, according to Standard & Poor’s. The firm’s liquidity profile is strong and a potential initial public equity offering could provide “material cushion,” S&P said in a report.

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