Raízen’s Owners Split as Debt Crisis Deepens

The world’s largest sugar and ethanol producer is running out of road. Raízen confirmed on Wednesday that it is analyzing a proposed capital injection of R$4 billion — R$3.5 billion from Shell and R$500 million from a vehicle linked to the family of Rubens Ometto, the controlling shareholder of Cosan — alongside a broader restructuring of its financial debt. The announcement came hours after shares plunged 13% to R$0.60 on news that rescue talks between its two co-owners had broken down.

The company said it would seek to conduct creditor negotiations in an orderly manner and that the process could be implemented through an extrajudicial recovery if necessary. Raízen stressed it would continue operating normally and that the measures should not affect clients, suppliers, or business partners.

A Rescue That Fell Apart

The crisis escalated rapidly. On Tuesday, Shell Brazil’s CEO said the company was committed to investing R$3.5 billion in Raízen and expected Cosan to match that figure. By Wednesday, Reuters and Bloomberg reported that the talks had collapsed. According to Reuters, Shell had proposed contributing R$3.5 billion, Cosan R$1 billion, and Ometto personally R$500 million. But Cosan could not match Shell’s offer, and a dispute over the renewables division torpedoed the broader agreement.

Cosan ultimately decided not to proceed with the R$1 billion that BTG Pactual had been expected to invest through a new partnership, leaving Shell as the only committed backer. Shell and Cosan each hold 44% of Raízen, a joint venture they established in 2011. With the talks concluded, Shell said it still intends to inject its R$3.5 billion and support ongoing discussions with banks and creditors.

The Scale of the Problem

Raízen’s financial deterioration has been severe. Net debt climbed to R$55.3 billion by the end of December 2025, driven by heavy capital expenditure, unstable weather, and wildfires that reduced sugarcane harvests and milling volumes. Leverage reached 5.2 times EBITDA, up from 3.0 times a year earlier. The company reported a net loss of R$15.6 billion in the October-December quarter, inflated by an R$11.1 billion impairment charge linked to credit rating downgrades.

Bonds are trading at approximately 30 cents on the dollar, implying that creditors expect substantial losses. UBS BB estimated late last year that Raízen would need between R$20 billion and R$25 billion in fresh capital to stabilize its balance sheet — far more than the R$4 billion now on the table. Shares have lost more than 80% of their value since the 2021 IPO and were recently trading below R$1.

Restructuring Options Narrow

The company has been divesting assets to raise cash, selling six mills and exiting its Oxxo convenience store joint venture with Mexico’s Femsa. A sale of its Argentine refinery and service station network to Mercuria Energy for roughly $1 billion is reportedly near completion. But asset sales alone cannot close the gap. The measures under evaluation — converting part of the debt to equity, extending maturities on the remainder, and continuing non-core asset disposals — amount to an acknowledgment that Raízen’s capital structure is broken.

Contagion Risk

The fallout is spreading. S&P has already downgraded its outlook on parent Cosan to negative, citing spillover risks from Raízen’s deterioration. Raízen itself has been cut to junk status by major rating agencies. With Rothschild advising Raízen and Moelis representing an ad hoc bondholder group, the contours of a full-scale restructuring are forming. The question is no longer whether Raízen will restructure, but how much pain its creditors and shareholders will absorb — and whether Shell’s willingness to invest alone is enough to prevent a formal insolvency proceeding.

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