Defaulting Sugar Producers Signal More Bond Pain to Come

After two defaults in Brazil’s sugar industry in less than a year, bond investors are increasingly concerned more borrowers will meet a similar fate.

Take Tonon Bioenergia SA. This month alone, the sugar producer’s $300 million of notes due 2020 have plunged 19.3 percent to a record low 48.4 cents on the dollar. Bondholders are also abandoning USJ Acucar e Alcool SA, which has seen its notes due 2019 plummet to about 50 cents.