(Bloomberg) -- Margarita Louis-Dreyfus, the billionaire owner of the eponymous commodities trader, has agreed to bail out her struggling Brazilian sugar business with a $1.05 billion capital injection, ramping-up financial pressures on the Russian-born heiress.
The Biosev SA rescue boosts obligations burdening Louis-Dreyfus, who faces an unrelated $1 billion cash call to buy shares in Louis Dreyfus Holding BV from other family members under a deal struck years ago. The need for extra funds comes as her commodities trading house, Louis Dreyfus Co., suspended dividends in 2017 for the first time in 13 years.
Louis-Dreyfus's cash injection for Biosev SA also unlocks an agreement with a group of banks to refinance the mountain of debt accumulated by the Brazilian sugar unit after years of losses.
About $800 million of the capital increase will be used to reduce liabilities, with the rest strengthening Biosev's cash position, the company said Wednesday in a statement, confirming an agreement reported earlier this month by Bloomberg. The statement didn't say whether the reduction of liabilities will be conducted via a debt-for-equity swap, as people familiar with the matter said earlier this month. Biosev also reached agreement with 11 lenders to extend the maturity of banks loans totaling 3.66 billion reais ($1.1 billion).
“This move puts the company on a whole different level,” Biosev Chief Executive Officer Rui Chammas said in an interview.
Financial Squeeze
The requirement to bail out its Brazilian arm comes at a difficult juncture for Louis Dreyfus Holding BV, which controls Louis Dreyfus Co., one of the world's largest agricultural-commodity merchants. Margarita Louis-Dreyfus, who controls the holding company through a family trust, needs cash to fulfill a legal agreement to buy back shares from other family members -- a financial obligation estimated at about $1 billion.
A Louis Dreyfus spokeswoman in Geneva declined to comment.
Louis Dreyfus Co. said last week it suspended dividend payments to its family owners, who received average annual payouts of $270 million over the previous decade. Net income in 2017 rose 4 percent to $317 million, largely on the back of a strong performance by the metals unit that LDC is selling to a Chinese consortium. The strong metals performance offset continued weak agricultural results caused by bumper grains crops and low prices.
Biosev shares started trading in Sao Paulo in 2013, after Louis Dreyfus spun off the sugar business. Controlling shareholder, LDC, has spent years pouring money into Biosev through pre-payment loans linked to sugar-export contracts.
Biosev said that its minority shareholders may participate in the capital increase, contributing as much as 1.33 billion reais. The agreement with its lenders will reduce the average cost of its renegotiated debt by 150 basis points, according to CEO Chammas. The company will seek opportunities to diversify funding sources after the transaction is completed, possibly by issuing bonds, he said.
To contact the reporters on this story: Simon Casey in New York at scasey4@bloomberg.net, Gerson Freitas Jr. in São Paulo at gfreitasjr@bloomberg.net, Andy Hoffman in Geneva at ahoffman31@bloomberg.net, Javier Blas in London at jblas3@bloomberg.net.
To contact the editors responsible for this story: Simon Casey at scasey4@bloomberg.net, Dylan Griffiths, Nicholas Larkin
©2018 Bloomberg L.P.
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