The 2010s were tough years for the Brazilian sugar cane industry. Many mills suffered from negative cash flow generation; some defaulted on their financial obligations and entered bankruptcy protection via the Judicial Recovery process.
We were asked by a milling group in mid-2019 to help with its financial recovery by raising new capital and restructuring its financial obligations with its main creditors.
CZ Approach
We used our extensive in-house corporate finance expertise on restructuring…:
- Detailed cash flow projections.
- Understanding of main drivers of cash generation.
- Creating restructuring strategy considering principal amortization schedule, guarantees, interest rate and covenants.
- Negotiating with creditors to create a constructive environment.
…and for debt raising:
- Detailed credit assessment and deal structuring to create information memorandum.
- Unique access to global and local funds and banks with appetite to provide finance.
- Explaining client’s credit; deal negotiation.
- Due diligence coordination, definitive documents negotiation & disbursement.
CZ Solution:
Within 5 months we had completed both the debt restructuring and debt raising. To ensure future liquidity and the capacity to properly invest in its operations, the company secured a long-term Export Prepayment Finance Agreement through raw sugar supply agreements with CZ.
With the company performing its obligations, the debt restructuring process had a constructive approach and found strong support from its creditors. The result was BRL 280m (approximately 80% of total debt) restructured for an 8-year tenor.
Please find below media coverage of the deal (Valor Econômico)
Outlook
The company’s financial turnaround has enabled it to invest in the renovation of its cane fields and modernization of its processes. This has helped it remain competitive. In 2019/20, the company crushed a record amount of cane – 2.4m tonnes – aided by good field productivity and efficient agro-industrial operation.
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