September 3, 2018 / 10:30 PM / 18 days ago

Castlelake considering Brazil sugar mills for acquisition: source

SAO PAULO (Reuters) - Castlelake LP, a U.S.-based investment fund, is planning to acquire stakes in distressed Brazilian sugar and ethanol companies, a source with direct knowledge of the plans said on Monday.

Castlelake, which defines itself as an investment firm “focused on alternative assets, sub-performing loans, dislocated industries and special situations”, had access to extensive information on five Brazilian companies in the sugar and ethanol sector, the source said, asking for anonymity because they were not authorized to speak about the plan.

The fund is said to have begun talks with at least two of the five companies, aiming to buy a controlling stake, the source said, without elaborating on the current status of the talks.

Castlelake later requested the same type of information from five additional companies in the Brazilian cane industry to expand its evaluation radius and locate other possible targets, the source said.

The fund did not immediately return a request for comment.

Earlier this year, Castlelake was cited in a negotiation to acquire mills owned in Brazil by Indian sugar producer Shree Renuka Sugars Ltd, who filed for court protection against creditors in 2015. [L8N1Q93LF]

The companies have not reached a deal so far. Renuka is expected to sell one of its mills in an auction later this year to pay part of its debt. Castlelake could be a bidder in that auction, the source said.

More than 50 mills closed in Brazil in the last five years after a prolonged period of low sugar and ethanol prices and expensive credit. Dozens have filed for protection against creditors.

The source said the sharp weakening of the Brazilian real this year boosted interest from Castlelake, since it makes acquisitions cheaper in dollar terms.

Reporting by Marcelo Teixeira; Editing by Alistair Bell

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