How Raízen (RAIZ4) Engineered Brazil’s Biggest Corporate Restructuring

Raízen, the Brazilian sugar and ethanol giant and a joint venture between Shell and Cosan, has formalized a record-breaking 64.7 billion reais ($11.5 billion) out-of-court restructuring plan. The agreement, filed with São Paulo’s 3rd Bankruptcy Court, marks the largest "recuperação extrajudicial" (corporate restructuring) in Brazil’s history, securing support from 75.4% of its creditors after months of intense negotiations.

The restructuring follows a period of severe financial strain for the company, driven by aggressive investments in second-generation ethanol and renewable energy projects that coincided with weaker-than-expected sugarcane harvests, high interest rates, and capital-intensive expansions that failed to yield immediate returns.

Step-by-Step Restructuring Framework

The finalized plan outlines a comprehensive roadmap to stabilize the company's finances and reorganize its sprawling operations:

• Debt Conversion and Refinancing: The company will convert 45% of its 64.7 billion reais debt into equity. Creditors opting for this route will receive "Units" (comprising one common and one preferred share) priced at 0.50 reais per Unit. The remaining 55% of the debt will be refinanced through new financial instruments;
• Capital Injection: Shell has committed a 3.5 billion reais ($620 million) cash infusion to bolster the company's capital structure. Aguassanta Participações, linked to the Ometto family, may contribute an additional 500 million reais;
• Asset Divestment: To streamline operations and raise immediate liquidity, Raízen sold its downstream assets in Argentina, including refining and distribution, to the Swiss-based Mercuria Energy Group for $1.42 billion;
• Governance Overhaul: The company’s board will be restructured to include seven members. Four will be appointed by supporting creditors, including the board's chair, while three will be named by the shareholders responsible for the capital injection. Shell will maintain its board presence as long as its brand licensing agreement remains in effect;
• Operational Split by 2027: Raízen plans to divide into two independent entities by the end of 2027: Raízen Energia (focusing on sugar, ethanol, and bioenergy) and Raízen Combustíveis (concentrating on fuel and lubricant distribution under the Shell brand).

Market Reaction and Outlook

Brazilian energy giant Raízen has secured a historic restructuring agreement. Now, the plan, backed by 75.4% of creditors, aims to stabilize the Shell-Cosan joint venture following heavy losses from aggressive renewable energy expansions and high interest rates.

Key components of the deal include:

• Debt-to-Equity Swap: 45% of the debt will be converted into equity, potentially giving creditors up to 80% control;
• Cash Infusion: Shell will inject 3.5 billion reais ($620 million) in new capital;
• Divestment: The company sold its Argentine downstream assets for $1.42 billion to Mercuria Energy Group;
• Strategic Split: By 2027, Raízen will split into two independent units: Raízen Energia (sugar/ethanol) and Raízen Combustíveis (fuel distribution).

Despite initial resistance from major creditors like Itaú Unibanco, the deal provides a clearer trajectory for the company’s survival in the critical agribusiness and energy transition sectors.

The negotiations were characterized by significant friction, particularly with Itaú Unibanco, which initially opposed the deal and attempted to sway other creditors before eventually signing. 

Analysts view the plan as a critical step for Raízen, which is a linchpin in Brazil's agribusiness and energy transition sectors. By converting a massive portion of its debt into equity, creditors could eventually control up to 80% of the company, fundamentally altering the historical Shell-Cosan partnership. Shell stated the move provides "greater financial stability and a clearer trajectory for the future," preserving the brand's presence in Brazil's vital fuel and aviation markets (SAF).

Raízen (RAIZ4) Confronts R$65bn Debt Mountain in One of Brazil’s Biggest Energy Restructurings

Raízen, one of Brazil's largest energy companies, and a Shell and Cosan joint venture, has submitted an extrajudicial recovery application to renegotiate its R$65 billion debt obligations. 

The company which leads the worldwide biofuel market faces what an expert called a "perfect storm" because high interest rates and increased competition and the market refuses to pay extra costs for its eco-friendly products. The restructuring process represents one of the most extensive corporate restructurings in Brazilian history because it ranks after the Odebrecht (now known as Novonor) case.

Marcelo Gasparino who worked as a board member for Petrobras and served as Vale's board vice-president called the action a "courageous decision." He explained that "The approval process for this radical measure exists challenges because people need to understand that they must break eggs to create an omelet.

Raízen experienced its current problems because it pursued aggressive expansion which required debt financing during a time when interest rates were low, at 2%, in 2020, and now interest rates in Brazil are at 15% — or many economists, one of the reasons interest rates are so high is the irresponsible way the Bolsonaro government lowered interest rates in 2020. Critics point out that the measure, taken with the aim of stimulating the economy during the pandemic, was late or excessive, contributing to inflation and currency devaluation. 

At this time, Raízen made substantial investments in second-generation (E2G) ethanol which operates as a cleaner biofuel but the market has taken time to accept it. At the same time, Brazil witnessed the emergence of lower-priced corn-based ethanol products which has established strong competition to Raízen, that produces ethanol from sugarcane.

Another major change at Raízen, that now is seen as a strategic mistake, was when the company, in 2019, entered the retail sector through a partnership with the Mexican group FEMSA, bringing the convenience store chain Oxxo to Brazil. Analysts viewed the move as a distraction because it fell outside the company’s core energy business.

The venture required heavy capital investment to open hundreds of stores, but returns fell short of expectations. After searching for potential buyers for its stake, Raízen’s leadership decided to exit the business. Continuous cash burn led the joint venture to end in 2025.

Following the split, FEMSA resumed control of Oxxo’s Brazilian operations, while Raízen retained management of more than 1,300 Shell Select and Shell Café convenience stores. The Brazilian Oxxo operation never reached break-even, becoming a factor that worsened Raízen’s current financial crisis.

Gasparino also explained the situation now: the restructuring plan which has already been approved by creditors who control 47% of the debt provides multiple solutions which include non-core asset sales and debt-to-equity conversions and new capital funding from Shell and Cosan which are the parent companies.

The company has made a statement about its operations which will remain unchanged but minority shareholders will suffer the most from the upcoming crisis. According to Flávio Conde, analyst of Levante Investimentos,  now creditors are goingo to take control of all business value during a high-debt restructuring because they hold priority over shareholders.

Although the situation is very concerning, the company still maintains a strong position in its core fuel distribution operations, and management has taken steps in recent months to secure its future. Gasparino, for example, explained the situation by saying: “I see light at the end of the tunnel because the work being done now will create better results for everyone involved than what exists today.”

Now, the expectation is for deleveraging through an out-of-court restructuring process, aimed at improving margins in the distribution business, but with shares under heavy pressure and amid strong market skepticism.

Raízen (RAIZ4) Financial Crisis: Brazil's Sugar Giant Faces Uncertain Future

Raízen, the world's largest sugar producer and a joint venture between Shell and Brazilian industrial group Cosan, has, according to CNN Brasil, reported a quarterly net loss of R$15.6 billion (approximately $3.1 billion USD) and warned of "significant uncertainty" regarding its ability to continue operations.

The company, which also operates a vast network of fuel distribution, is grappling with R$55.3 billion in net debt and a leverage ratio of 5.3 times its EBITDA, according to its latest financial statements through December.

Sources close to the matter indicate that BTG Pactual, a fund manager that became part of Cosan's controlling shareholder group last year, proposed a strategic split of Raízen. The proposal suggests separating the fuel distribution business from other assets, allowing the fuel station unit to secure new capital from the bank.

However, this idea has met resistance from creditors who prefer to maintain the company's integrity to ensure a swift recovery. Creditors are reportedly pressuring shareholders to inject substantial new capital into Raízen.

Raízen, Cosan, BTG Pactual, and Shell have all declined to comment on the ongoing situation. Shell, however, reiterated its commitment to working with Raízen and Cosan to support the company's deleveraging efforts.

Brazilian President Luiz Inácio Lula da Silva recently convened a meeting with senior executives and government officials to address the financial crisis facing Raízen.

The meeting in Brasília included Raízen’s main shareholders, Cosan and Shell, as well as a senior executive from BTG Pactual. Government representatives reportedly present included Finance Minister Fernando Haddad and BNDES President Aloizio Mercadante. The discussions took place shortly before Carnival and Lula’s trip to Asia.

Days later, Raízen formally requested financial support from its major shareholders after another weak quarterly performance, intensifying negotiations to address its debt and liquidity challenges. Most parties declined to comment, while Petrobras President Magda Chambriard said she did not attend any meeting on the matter.

Raízen financial turmoil has sent ripples through the agribusiness sector, particularly among sugarcane suppliers. With the 2026/27 sugarcane harvest weeks away, independent producers supplying the company are closely monitoring the situation, expressing heightened caution about renewing contracts. Historically, these renewals were almost automatic, but now producers are considering alternatives, including spot market sales with immediate payment, to mitigate risks.

Raízen's decision to directly assume payment obligations to sugarcane growers, moving away from a bank-intermediated discounted risk model, has further amplified concerns among suppliers. While payments are currently up to date, the change increases suppliers' exposure should Raízen's financial health deteriorate.

The crisis at Raízen underscores broader anxieties within Brazil's corporate debt market, especially given the prevailing high interest rates, currently at 15%. Analysts note that even large corporations with strong banking relationships are struggling to manage debt servicing costs, with Raízen alone facing R$7 billion in annual interest payments. The potential for Raízen to seek judicial recovery could trigger a significant cascading negative effect on the Brazilian economy due to its sheer size and interconnectedness, potentially becoming one of the largest such cases in the country's history.

Market observers have noted a recent surge in sellers and a scarcity of buyers for Raízen and Cosan bonds in the secondary market, reflecting a widespread lack of confidence in the company's ability to recover. Despite ongoing negotiations with entities like BNDES and the involvement of its major shareholders, Raízen faces the daunting task of raising an estimated R$20 billion to stabilize its financial position by 2026.

The situation highlights the vulnerability of even essential sectors like fuel distribution and agribusiness to high interest rates, impacting investment, hiring, and overall economic expansion, despite recent positive inflation readings.