Brazil's Brenco in talks for stake sale - report

SAO PAULO Aug 24 (Reuters) - Brenco, a Brazilian ethanol producer backed by venture capitalist Vinod Khosla and AOL founder Steve Case, is in talks with three separate groups to sell a stake in a bid to raise cash and restructure its debt, Valor Economico newspaper said on Monday.

The company might sell a controlling stake to state-run energy giant Petrobras (PETR4.SA)(PBR.N) or seek a merger with ETH Bioenergia, an ethanol producer controlled by Brazil's Odebrecht group, the daily said.

Brenco, whose CEO and COO are the former CEO and downstream director of Petrobras, may also seek to raise cash from an unnamed overseas fund, Valor reported.

Brenco and Petrobras did not immediately return calls seeking comment on the newspaper report. A spokeswoman for ETH Bioenergia said the company would not comment on speculation.

Brenco has hired consultancy Angra Partners to help with a financial restructuring, the daily said. Brenco had planned to invest 5.5 billion reais and become one of Brazil's top ethanol producers, with annual output capacity of 1 billion gallons of ethanol.

Brenco has raised nearly 2.5 billion reais in the past year, including 1.2 billion reais from Brazil's state development bank BNDES and 700 million reais from investment funds, Valor said. (Reporting by Elzio Barreto and Camila Moreira; editing by John Wallace)