Ruiz Coffees, Brazil’s second-largest coffee grower, is negotiating a deal to transfer pledged farmland to a fund controlled by capital-market creditors, a move aimed at keeping its farms running while the company restructures more than 1 billion reais ($194 million) of debt, according to a person familiar with the talks.
The creditors hold alienação fiduciária over the properties, a Brazilian security arrangement that gives lenders title to the assets until the debt is repaid. That collateral is central to the negotiations because such claims generally sit outside Brazil’s recuperação judicial, the court-supervised restructuring process similar to Chapter 11 in the US.
That means the creditors would not necessarily be bound by a restructuring filing and could instead seek to seize the farms.
The talks are advancing and could benefit both sides, the person said.
Under the structure being discussed, the farms securing the debt would be transferred to a creditor-controlled fund. Ruiz Coffees would then lease back the properties, continue operating them and retain a long-term option to repurchase the land.
For João Ruiz Lourenço Filho, the businessman who runs the group, an agreement would help preserve at least part of the farmland portfolio he built. For creditors, it could reduce legal uncertainty. Enforcing collateral through Brazilian courts can take years, potentially eroding the value of the guarantee.
Debt Burden
The plan’s success depends on aggressive steps to cut leverage, including the sale of other farms, the person said.
Skepticism remains high among market participants. One person who has done business with the group said Ruiz Coffees took on costly debt to expand through land purchases, with some financing priced at CDI plus 5 percentage points a year. CDI is Brazil’s interbank lending benchmark and closely tracks the Selic, the country’s policy rate.
“The math doesn’t work,” the person said.
A fund manager said it was striking that a coffee producer ran into distress after several years of unusually strong margins, which the person said reached as much as 70%. The company became so stretched that it returned farms it had agreed to buy after failing to pay for them, incurring penalties in the process, according to people familiar with the matter.
Court Protection
Ruiz Coffees has been shielded from enforcement actions since last week, buying time as it faces a wave of lawsuits from suppliers seeking payment on overdue debts.
The company has so far received a more constructive response from capital-market creditors than is typical in some distressed-farmer cases in Brazil, where borrowers often seek to bring fiduciary collateral into the pool of claims covered by a court restructuring.
Representatives for Ruiz Coffees have argued that court protection became unavoidable after suppliers moved to collect overdue bills. Without relief, they said, the company risked being squeezed in the middle of the coffee harvest and losing a significant portion of its picked crop to enforcement actions.
The injunction allows Ruiz Coffees to preserve its remaining cash — about 60 million reais, according to two people familiar with the matter — while it works on a plan to address its liabilities. That plan may still involve a formal court-supervised restructuring.
The group operates across more than 9,000 hectares, or about 22,200 acres.
