With court-supervised reorganization plan approval, Atvos prepares to resume investments

Atvos, a company that is among the country’s largest ethanol producers, had its court-supervised reorganization plan approved at the General Meeting of Creditors. The document is to be approved by the Judicial Branch.

Approved by a large majority of creditors, the plan will strengthen Atvos’ capital structure. Atvos plans to resume investments with the purpose of reaching the cane grinding capacity of 35 million tons in six years. Currently, the business is responsible for approximately 10% of the ethanol supply in Brazilian market. Once the financial balance is established, Atvos will be able to perform itsbusiness plan focused on the enlargement and renewal of the sugarcane fields and increase productivity of their industrial units. The growth in production will increase cash generation and start a new cycle of increase the company’s value.  The court-supervised reorganization plan also provides for the strengthening of governance practices with a Board of Directors composed of five directors, of which three are independent.

Payment to creditors

The court-supervised reorganization plan specifies the payment terms for the various classes of receivables owed by the company. The priority is to pay supplier credits and agricultural partners. Payments will be made in a single installment, within 90 days (for creditors who choose to receive up to R$ 50,000), or in three annual installments with the first payment being due one year after the approval of the plan approved today. Labor debts have not been restructured, so they will not be subject to the court-supervised reorganization plan and will be regularly paid according to their due dates.

Through transfer of 46% of the operating units’ debt, the company’s leverage will be reduced from six to about three times the value of net debt in relation to its EBITDA. This reallocation includes amounts due to financial institutions that represent 97% of the total debt. 54% of debt remaining in the operating units will have the first interest payment in June 2022 and the first principal payment in December 2022 at an interest rate of 115% of the Interbank Certificates of Deposits.

The plan includes some additional guarantees to financial creditors. For those who choose to convert part of their debts into debentures entitled to future dividends, the securities to be received will have fiduciary transfer of Atvos shares and the main assets of the company and fiduciary transfer of dividends. Financial creditors with guarantees may convert 46% of their debts into these debentures, while unsecured financiers will be able to convert 61% of debts. This option will be offered to non-bankruptcy creditors who decide to join the plan, with the possibility of converting 20% of the debts.

Business Plan

By the 2025/2026 harvest, the goal is to increase from 13% to 17% the renewal rates of the sugarcane field, which will have its average age reduced from 3.9 years to 3 years. In relation to the expansion, 55 thousand new hectares of planting are planned. Today, the company manages 498,000 hectares of sugarcane.  The expectation is to reach in six harvests the production of 2.7 billion liters of ethanol, 317.000 tons of VHP sugar and 3.600 GWh of electricity from sugarcane biomass. With the dilution of costs promoted by increased grinding, the profitability of operations is expected to improve significantly.

2019/2020 and 2020/2021 harvests

The company closed the 2019/2020 harvestwith a total grinding of 26.9 million tons of sugarcane, an increase of 1% compared to the 2018/2019 cycle. The company produced 2.14 billion liters of ethanol (hydrated and anhydrous), in addition to 235,000 tons of VHP sugar and the cogeneration of 2.8 thousand GWh of electricity from biomass.

The average TRS (Total Recoverable Sugar) content recorded in the period obtained the company’s best historical result of 133.8 kg/hectare, surpassing the previous indicator by 2%. With a total of 498,000 hectares of sugarcane planted, in the last harvest 67,000 hectares were planted (considering own planting and carried out by suppliers), a decrease of 7.6% compared to the last harvest, due mainly to cash restrictions. From this planted area, 92% were turned to renovation, fundamental for the company to reach its operational maturity.

For this 2020/2021 harvest, Atvos projects to grind around 26.9 million tons of cane in this new harvest, enough to produce 1.9 billion liters of ethanol and 447,000 tons of sugar. In the period, the company is expected to invest R$ 350 million in the renovation and expansion of sugarcane fields, agricultural equipment and industrial improvements.