February 19, 2018 / 6:17 PM / 6 months ago

Castlelake in talks to buy Brazil mill from Shree Renuka -sources

SAO PAULO, Feb 19 (Reuters) - U.S.-based private equity firm Castlelake LP is in talks to take over a sugar and ethanol plant in Brazil owned by Indian company Shree Renuka Sugars Ltd , according to two sources familiar with the negotiations.

The sources told Reuters that representatives from Castlelake held meetings with suppliers of the Revati mill, located in the municipality of Brejo Alegre, western Sao Paulo state, as they try to secure cane supplies before they can present a formal proposal to buy the plant.

Shree Renuka’s Brazilian unit filed for bankruptcy protection for its mills in Brazil in 2015. It tried to sell two of its plants in judicial auctions last years, but in both cases Brazil’s development bank BNDES, who is a large Renuka creditor, obtained injunctions blocking the auctions.

Castlelake and Shree Renuka did not immediately return requests for comments.

The Revati mill is a relatively new, large installation with capacity to process four million tonnes of cane per year.

The two sources, who asked not to be named, said the private equity group is set to present a formal proposal in March, if it manages to secure agreements with cane suppliers in the region.

One of the sources also said Castlelake is negotiating with Shree Renuka for the company to stop operations on its second plant in the region, called Madhu, as a way for the Revati mill to have more cane supplies, being able to operate at higher capacity. The source said there is disagreement over this aspect.

Castlelake would like Renuka to transfer all cane supplying contracts for a period of three years, but the Indian firm would agree to a shorter period, of two years.

There are no guarantees that a deal would not be affected by other court hurdles, since Renuka holds around 3 billion reais ($928.53 million) in debt.

$1 = 3.2309 reais Writing by Marcelo Teixeira; Editing by Alistair Bell

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