Raízen approves billion-dollar capital increase to enable recovery

São Paulo Raízen's board of directors approved this Friday (6) a capital increase of between R$3.5 billion and R$39.8 billion. The operation is the central stage of the company's extrajudicial recovery plan, controlled by Shell and Cosan, combining new money from Shell with the conversion of debt into equity.

The decision was unanimous and puts into practice what shareholders approved at meetings on October 30th. The plan was approved by the 3rd Bankruptcy and Judicial Recovery Court of São Paulo, where the extrajudicial recovery takes place.

The capital increase is a condition for the plan to become effective.

The new shares will be issued at R$0.25 of any type or class. The value is 28.6% lower than the average price of the last 30 trading sessions (R$0.35) and 7.4% lower than the closing price on Thursday (5) of R$0.27.

According to the company, the price was negotiated with creditors who hold more than half of the plan's credits.

Shell will contribute up to R$3.5 billion; in exchange, it receives up to 7 billion common shares and up to 7 billion class B preferred shares, a new category that will not be traded on the Stock Exchange. Aguassanta, the holding company of businessman Rubens Ometto, chairman of the board of Raízen and controller of Cosan, can invest up to R$500 million. The statement, however, treats this participation as hypothetical, and Cosan will not exercise the preemptive right over class B shares.

The operation will only be validated if Shell alone starts to hold the majority of the class B preferred shares issued, which give special rights provided for in the statute. It will also be necessary to subscribe to at least 14 billion shares, the volume that the oil company is responsible for. If this does not happen, the increase will not be approved and whoever paid will receive the money back, without correction.

Creditors enter through another route, with part of the plan's credits converted into units, papers that bring together a common share and a class A preferred share. In this part, no money enters the company's cash flow, and the debt is extinguished and exchanged for shares.

Creditors with debts in dollars or euros will be able to receive the securities in the form of ADRs (share receipts traded in the United States). To achieve this, the board approved a level 1 program, with Citibank as depository.

The first R$5 billion will go to working capital, or R$4.5 billion if Aguassanta is left out. What's more, 70% will be used to pay off debts and 30% will reinforce cash.

According to the published rules, all shareholders will be able to participate in the capital increase between November 9th and December 8th. From Monday (9), the shares will be traded without subscription rights.

The company calculates that whoever exercises the right in full will maintain at least the current share. Those who do not exercise will have their participation diluted by around 57%, if only the minimum is subscribed, and by up to 94%, if the issuance is maximum. There will be no redistribution of surplus shares.

The election of a new board, the reform of the statute and a capital reduction of up to R$35 billion are also planned. This reduction will be paid with the delivery of Raízen Energia papers.