Raízen took its $12.5 billion debt pile into out-of-court restructuring

Raízen — Brazil's largest ethanol producer, one of the country's three main fuel distributors, and a 50/50 joint venture between Cosan and Shell — filed an out-of-court reorganization plan to restructure debts of around 65 billion reais (US$12.5 billion), with impacts reaching Brazil, Argentina and Paraguay, where it runs the Dock Sud refinery, more than 700 stations and around 350 stations respectively.

The company traced its crisis to a combination of factors: simultaneous expansion across different lines of business in a context of unfavorable sugar and ethanol prices, a bet on second-generation ethanol that was not successful, and the war in Ukraine slowing the energy transition and demand for biofuels. Rising interest rates added leverage pressure, while adverse weather and fires hit harvests — to the point, one fund manager told BNamericas, that operational continuity was questioned and agencies downgraded its credit to high-risk restructuring levels.

The out-of-court route gave the company 90 days to win minimum creditor adherence for court ratification. The plan involved capitalisation by shareholders — 3.5 billion reais from Shell and 500 million reais from Água Santa — corporate reorganizations to segregate part of the business, and asset sales. Raízen had already been restructuring since 2024, selling dozens of Brazilian solar plants and weighing sales of its Argentine operations, once negotiated for more than US$1 billion, and other non-core assets.

Expansion ran in several directions at once — ethanol, distribution, second-generation technology — at the exact moment sugar and ethanol prices turned unfavorable.

The second-generation ethanol bet did not pay off, stranding investment just as the Ukraine war slowed biofuel demand.

Rising interest rates compounded leverage, and fires plus adverse weather squeezed the harvests that feed the plants.

Simultaneous expansion across business lines multiplies exposure: when prices turn and rates rise, every front opens a second front against liquidity.

Hike Capital manager Angelo Belitardo called a recovery feasible but high-risk: creditors preferred keeping the company intact rather than breaking it up, Shell had signalled 3.5 billion reais of support, and asset sales remained available — but without new capital, rapid execution and operational stability, 'the agreement may buy time, but it will not solve the structural problem'.