• Agreement expected to be signed soon
• Parties agreed on 60%-70% haircut
• Raízen targets year-end completion of restructuring plan, ahead of 31 March deadline

Raízen has concluded negotiations with Brazilian authorities regarding approximately BRL 20bn (USD 3.73bn) in tax debt, according to three sources close to the matter and a source familiar with the matter.

The sides agreed on a haircut of around 60%-70%, the first source close said.

The agreement should be signed soon, the first and second source said.

“The negotiation ended in line with the government program and with no surprises,” the first source said, referring to the legal framework that provides preferential treatment for Brazilian companies in crisis.

Under Brazil’s tax settlement framework for companies undergoing restructuring, tax authorities may grant substantial discounts on eligible tax liabilities. For companies in judicial recovery, the maximum haircut can be 70% of the debt.

Most of Raizen’s tax debt is owed to the federal government, and an agreement on this matter was a condition precedent for implementation of its restructuring plan, as reported.

All conditions precedent must be satisfied, or waived, by 31 March 2027, according to the plan.

Raízen’s objective is to finish the implementation of its restructuring plan before the end of the year and before the legal deadline in March, as reported.

Raízen called an extraordinary general meeting and a special meeting of preferred shareholders to 30 October to discuss, among other subjects, its capital increase, as reported.

In the meeting, the company will ask preferred shareholders to approve a new class of shares carrying board election rights as part of its restructuring plan, as reported.

Class B shareholders would have graduated rights to elect up to three board members, depending on ownership thresholds and other conditions, as reported. The shares would carry restricted voting rights and the same economic entitlements as existing preferred shares but would not be publicly traded, as reported.

Raízen’s capital increase will range from BRL 3.5bn to BRL 39.8bn and the subscription period will run from 9 November to 8 December, according to an 27 October announcement from the company.

The transaction remains subject to approval at the meeting scheduled for this week and to a resolution of the Board of Directors at its meeting scheduled for 6 November, according to Raízen’s announcement.

Raízen is also selecting possible CEO and CFO names for the new companies emerging after the separation of the fuel distribution and sugar and ethanol businesses, as reported.

Creditors have already selected at least four candidates for the boards of directors of the two companies, as reported.

A Raízen spokesperson declined to comment on the matter.