Another Brazil Ethanol Producer Seeks Bankruptcy Protection

Fabiana Batista and Gerson Freitas Jr

Abengoa Bioenergia Brasil SA became the latest Brazilian sugar and ethanol producer to file for bankruptcy protection following the country’s economic crisis and a slump in commodity prices.

The company, a unit of Spain’s Abengoa SA, requested judicial protection in a court in Santa Cruz das Palmeiras municipality, Sao Paulo state, it said in an emailed statement Tuesday. Its bank debt was 837 million reais ($265 million) as of December.

The move followed unsuccessful attempts over the last 19 months to attract outside investors and restructure its debt. Abengoa Bioenergia also cited Brazil’s political crisis and a lack of credit as contributing factors to its bankruptcy.

The company runs two mills with a combined capacity to crush about 7 million metric tons a year of sugar-cane in Sao Paulo state, and it had been in advanced talks to sell them to E Fert, an United Arab Emirates-based investment firm controlled by Pakistani investors. Those negotiations ended in May after fiscal, labor and operating issues made a deal too risky for E Fert, people familiar with the matter said at the time.

“The company has serious issues, and will face many difficulties to raise credit and continue to operate in the next season,” said Leandro Chiarottino, a lawyer representing sugar-cane suppliers who are among Abengoa Bioenergia’s creditors. Finding a new operator for the company’s mills is necessary to keep them running, he added. “The assets should be put for sale as soon as possible under the recovery plan.”

Glencore Deal

About 50 sugar and ethanol mills in Brazil have closed and around 70 have filed for bankruptcy since 2011 as a slide in domestic sugar prices combined with a cap on fuel prices eroded profits and led to defaults.

Some companies have used bankruptcy protection to sell assets. Raizen Energia SA, Brazil’s largest sugar company, completed its acquisition of two bankrupt units from Tonon Bioenergia SA earlier this month. Glencore Plc bought bankrupt sugar-cane processor Unialco SA for 348 million reais in February.

Seville-based Abengoa filed for preliminary court protection in late 2015 following a failed attempt to raise capital as it buckled under about 9.4 billion euros ($11.1 billion) of debt built up over years of expansion. Some of its other subsidiaries around the world, including its utilities arm in Brazil, are also in bankruptcy protection. It sold three U.S biofuel plants to Green Plains Inc. for $237 million in September.

About BloombergNEF

BloombergNEF (BNEF) is a strategic research provider covering global commodity markets and the disruptive technologies driving the transition to a low-carbon economy. Our expert coverage assesses pathways for the power, transport, industry, buildings and agriculture sectors to adapt to the energy transition. We help commodity trading, corporate strategy, finance and policy professionals navigate change and generate opportunities.
Sign up for our free monthly newsletter →

Want to learn how we help our clients put it all together? Contact us