(Adds capital injection, refinancing terms in paragraphs 3, 7-13)
By Tatiana Bautzer
SAO PAULO, Nov 4 (Reuters) - Odebrecht Agroindustrial SA, the sugar and ethanol unit of Brazilian conglomerate Grupo Odebrecht SA, has hired Rothschild and Virtus BR Partners to advise on refinancing about 9 billion reais ($2.4 billion) in bank loans, two sources with direct knowledge of the plans said.
Rothschild and Virtus, a São Paulo-based advisory shop specializing in distressed companies, have already contacted all banks involved in the process and obtained a standstill on payments, said one of the sources, who requested anonymity since the talks remains private.
The refinancing, which would stretch out maturities on outstanding loans, depends on Grupo Odebrecht’s plan to invest 836 million reais into the unit, Odebrecht Agroindustrial told Reuters in a statement. The capital injection was announced last month.
Odebrecht Agroindustrial, Brazil’s third-largest sugarcane milling group, declined to comment on the hiring of financial advisors. Rothschild and Virtus also declined to comment.
The plan comes as parent Grupo Odebrecht, Latin America’s biggest engineering conglomerate, grapples with accusations by prosecutors that it and more than a dozen peers paid bribes to members of Brazil’s ruling coalition in exchange for contracts with oil producer Petróleo Brasileiro SA and other state-owned companies.
The investigation has curbed the ability of Odebrecht and peers to refinance domestic and foreign debts during Brazil’s worst recession in a quarter-century, a currency slump and the highest domestic borrowing costs in nine years.
As part of the probe, Grupo Odebrecht Chief Executive Officer Marcelo Bahia Odebrecht was charged with corruption, money laundering and criminal conspiracy and is now considered a defendant.
Formerly known as ETH Bioenergia SA, Odebrecht Agroindustrial was founded in 2007 to take advantage of rising government incentives for cleaner energy producers. However, erratic biofuel market rules and a policy shift toward offshore oil exploration in recent years have hampered the sector, which also is struggling with its large size and high leverage.
Still, improved returns from sales at home and abroad this year are unleashing the first major flurry of investment in Brazil’s ethanol industry in nearly a decade. At least nine companies, including Odebrecht Agroindustrial, are expanding or building new capacity.
“The substantial injection of fresh funds and assets will be defined in a few months ... and will bring about strong deleveraging and a bolstering of the company’s capital structure,” the Odebrecht Agroindustrial statement said.
Under the refinancing, borrowing costs and other terms of the loan contracts will be respected, the company said in the statement.
The company, which owns nine ethanol mills in Brazil, had a net loss of 1.14 billion reais during the 2014-2015 crop, almost unchanged from the prior season.
$1 = 3.7691 Brazilian reais Editing by Guillermo Parra-Bernal and Bill Rigby; Editing by Lisa Von Ahn