Biggest Indian Sugar Refiner Seeks Debt Protection in Brazil

  • Company's debt unsustainable as sugar prices, real slump
  • Bankruptcy filing may grant company 180 days to recast debt

Shree Renuka Sugars Ltd., the biggest Indian refiner, filed for bankruptcy protection in Brazil as a slump in sugar prices and a weakening real widened losses. The shares fell in Mumbai trading.

Shree Renuka do Brasil Participacoes Ltda. and subsidiaries will be under court protection from creditors for 180 days if the court accepts its request, the company said in an exchange filing. The company said it expects the court will authorize it to continue its business as usual while it seeks a long-term sustainable solution for its capital structure.

The company’s total debt in Brazil is at 3.3b reais ($803 million), Tony Rivera, legal director at Renuka do Brasil SA, said by phone on Monday. Renuka do Brasil Participacoes controls Sao Paulo-based Renuka do Brasil SA and Parana-based Renuka Vale do Ivai SA with combined crushing capacity of 13.6 million metric tons of sugar cane a year. The company has enough cash to continue its operations for the entire season, it said.

Sugar Prices

Raw sugar futures traded on ICE Futures U.S. in New York fell for the past four years in the longest slump since at least 1962 amid rising global inventories. About 50 Brazilian mills out of about 340 have closed and 10 more are expected to halt operations in the current season, Brazil industry group Unica said in a May report. Debt in Brazil’s sugar industry is 82.5 billion reais, more than the 69.7-billion reais revenue expected for the 2015-16 season, Archer Consulting said in a June report.

Shree Renuka “believes that reorganization under judicial recovery is the best way to reorganize, protect our Brazilian subsidiaries and provide a path to our eventual turnaround in Brazil,” the company said.

Drought and frost, a cap on domestic ethanol prices, lower global sugar prices and the weakening of Brazil’s currency made its debt “unsustainable,” Shree Renuka said in an e-mailed response to questions.

Losses at Shree Renuka and its units widened to 18.1 billion rupees in the year ended March 31 from 14.8 billion rupees a year earlier, according to data on company’s website.

Shree Renuka is in talks with lenders to restructure debt and secure a moratorium on loans repayment to tide over the period of low sugar prices, Managing Director Narendra Murkumbi said by phone on Tuesday.

Shree Renuka’s shares tumbled as much as 5.2 percent to 7.30 rupees, before trading at 7.55 rupees by 11:32 a.m. in Mumbai. The shares have slumped 50 percent this year, extending losses in the past two years.

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