Agrogalaxy shifts focus to working capital after restructuring plan approval - Valor International

Agrogalaxy, a Brazilian distributor of agricultural inputs, has secured approval for its judicial recovery plan to restructure R$3.7 billion in debt, including overdue grain transactions. The creditor meeting, which extended into the early hours of Thursday (10), granted the green light for the plan, which aims to restore the company’s financial health through a multi-pronged strategy.

While acknowledging that the plan’s timelines and terms may raise questions in the market, CEO Eron Martins told reporters that the company is confident in its ability to meet the obligations. The immediate priority, he said, is strengthening Agrogalaxy’s working capital.

“Our focus now is on tightening collection, improving the client base, and targeting regions with lower climate risk, which directly affects the risk of payment default,” Mr. Martins said. He also stressed the importance of efficient inventory management: “We need to maintain stock levels that ensure service to producers in times of need, without overcommitting capital to inventory.”

The recovery plan received 1,376 votes in favor, 34 against, and 23 abstentions. It includes a range of payment options for so-called “partner” creditors—those who agree not to litigate against the company, support the plan, and continue supplying inputs at market prices under deferred payment terms.

The next step will be identifying how each creditor intends to proceed among the available options, which will help Agrogalaxy determine the final value of the restructured debt, accounting for discounts.

One of the company’s main strategies to reinforce its cash position is the sale of receivables portfolios. In January, Agrogalaxy announced the sale of a non-judicial, overdue debt portfolio worth around R$600 million, with the final value subject to due diligence.

In April, two funds managed by Jive, an asset manager specializing in distressed assets, submitted a binding offer to acquire receivables owed by rural producers in transactions involving Agrogalaxy and holders of Agribusiness Receivables Certificates (CRAs).

Once the plan is ratified by the courts, Agrogalaxy will establish an isolated business unit (UPI) for the receivables portfolio, encompassing both overdue credits and future receivables generated from upcoming sales.

The Jive funds’ proposal includes a fixed payment of R$91 million to be injected into Agrogalaxy’s cash flow, along with a debt exchange involving the CRAs. CRA holders who accept the offer will begin receiving payments from the new funds.

However, the sale of producer-related receivables is not automatic. A competitive auction process must be held to allow rival bids. “If competing proposals are received, a public hearing will be held to open the bids,” said Gustavo Salgueiro, legal counsel for Agrogalaxy. The Jive funds will retain the right of first refusal to match any superior offer. “We are confident this portfolio will be sold for at least the value of the binding offer,” he added.

The approved plan also includes the issuance of convertible debentures—debt instruments that can be converted into equity—offered to financial creditors involved in grain transactions and CRA holders. According to Mr. Salgueiro, Santander was among the few to express interest in this option.