Cantagalo General Grains SA (CGG), a Brazilian farming and trading firm, has reached a deal with lenders to restructure some $170 million in debt owed by its trading arm, management told Reuters on Tuesday.
Brazilian textile company Coteminas SA (CTNM4.SA) is the controlling shareholder of CGG. Its trading arm is a joint venture 43-percent-owned by Japan’s Sojitz Corp (2768.T).
Under the terms of the deal, the debt owed by the trading business will be repaid over seven years, with principal repayment starting after the third year.
Some of the banks involved in the deal were Banco do Brasil SA (BBAS3.SA), ABN Amro, Rabobank, Banco Bradesco SA (BBDC4.SA) and Banco Santander Brasil SA (SANB11.SA), according to CGG.
ABN Amro did not reply to a request for comment. Banco do Brasil, Rabobank, Bradesco and Santander declined to comment.
The company pledged its Itaqui port terminal in northern Brazil as collateral for the refinanced debt. Earlier this year the company had refinanced $10 million of debt, executives said.
CGG now aims to step up commodities trading and farming after a management reshuffle that scrapped a former business plan focused on the cotton trade.
“One of new management’s first corrections was to exit the cotton space,” said Brandon Crozier, chief executive since November. Cotton is capital intensive and CGG lacked the expertise and balance sheet to succeed in that market, he said.
This year CGG aims to trade some 800,000 tonnes of corn, down from 7 million tonnes of grains in 2014, as the firm focuses on improving profit margins through more efficient capital management.
CGG, one of the few Brazilian companies set up to both produce and trade agricultural commodities internationally, is also looking at ways to improve its farming business.
The company owns 100,000 hectares of land, 70 percent of which is arable, with a productive capacity of 350,000 tonnes of grain, according to executives. Third parties are farming the land this year while CGG carries out its turnaround.
When CGG resumes farming, executives said they will focus on non-GMO, high-protein soymeal, industrial organics and alternative rotation crops like sorghum, which it hopes will give it an edge in niche markets.
“We cannot be replicating what the ABCDs do well,” Crozier said, referring to ADM, Bunge, Cargill and Dreyfus that dominate global commodities trading.
Source: Reuters.com