Raízen on the brink of crisis: how the Brazilian energy giant was brought down by management failure and economic pressure

Lead: Raízen, the largest company in Brazil's sugar-energy sector, is facing a critical financial crisis. As of February 9, 2026, all three global rating agencies (Fitch, S&P Global, and Moody's) downgraded the company's rating, stripping it of its investment status. Divergent debt reached R$ 55.32 billion (a 43.4% increase over the year), with a critical debt-to-EBITDA ratio of 5.1 times — instead of the healthy 2-3 times for the sector. The company reported a loss of R$ 15.65 billion in the third quarter of the 2025/26 financial year.

Detailed Analysis

Debt Structure and Liquidity Threat

As of September 2025, Raízen's divergent debt amounted to R$ 53.4 billion, and including gross debt, the figure reached R$ 68.6 billion. Interest payments alone consume R$ 7.5 billion annually. According to Fitch's forecasts, the company maintains R$ 18.6 billion in cash plus revolving credit lines of NULL billion; however, these reserves will be fully depleted within two years at current spending rates. For 2026-2027, financial expenses and investments will consume R$ 9.5 billion and R$ 7.5 billion respectively, ensuring a negative cash flow.

Double Blow: Agricultural Crisis and Management Errors

The financial disaster at Raízen is the result of two parallel processes. The first is agricultural: after a record harvest in 2023/24, the Central-South region (the main operational base) faced severe drought, fires, and frosts in 2024/25. Sugar and ethanol production fell, and production costs reached historical highs. The entry into the new 2025/26 season is characterized by stabilization at a low level: less available sugarcane and increased structural costs.

The second factor is serious strategic miscalculations by management. The company halted trading operations that provided flexibility in managing price risks. More critically, the cancellation of the “risk sacado” mechanism (a practice of intermediate financing through banks when settling with Petrobras) was made. This tool provided R$ 12 billion in working capital financing. The new management closed it out of fear of tax complications (IOF), forcing the company to use its own cash flow for advance payments to suppliers, structurally worsening the balance sheet.

Loss of Investment Status and Contagion Effect

The downgrade of Raízen's rating triggered a cascading collapse: the company's bonds fell below 50% of their nominal value on the secondary market, forcing institutional funds to sell positions under forced rules. Investment committees of creditors with Raízen's global bonds hired White & Case as legal advisors. The crisis spread to the entire Cosan group: the subsidiary logistics company Rumo suspended the placement of R$ 1.5 billion in preferential bonds due to investor refusals amid rising risk.

Owners' Dilemma and the Role of BTG Pactual

Raízen is owned by Shell (a British oil and gas corporation) and Cosan (controlled by Rubens Ometto). Both parties face a conflict of interest. The estimated capitalization need is R$ 20 billion. Cosan, in its own financial dilemma, lacks the capacity for a leading role. Shell is not ready to invest alone. Since late 2025, the management structure of Cosan has included the investment bank BTG Pactual (through a reduction of Rubens Ometto), represented by partner Renato Mazzola. BTG is implementing a strict cost-cutting program in Cosan and its assets (Raízen, Rumo, Compass, Moove), while also seeking debt renegotiation — a standard approach for the fund.

Pressure from Criminalization of the Sector

Amid financial troubles, Raízen is also facing increasing pressure from competitors operating outside legal frameworks: fly-by-night firms, networks linked to organized crime. Rubens Ometto characterized this phenomenon as a “cancer” eroding legal competition and penalizing honest taxpayers.

Impact on BRICS

The crisis at Raízen has indirect implications for the BRICS economy through several channels:

Brazil's Energy Security: Raízen is not only a producer of ethanol (renewable fuel) but also a critical player in the energy balance. Its weakening could lead to a reduction in domestic biofuel supply and increased import energy dependencies.

Currency Flows and Investment Attraction: The loss of investment status complicates Brazilian companies' access to international capital markets, raising the cost of raising funds for the entire sector. The effect could be contagious for other large Brazilian conglomerates.

Energy Geopolitics: Shell's (a British company) involvement in negotiations rebalances power relations within BRICS. BTG Pactual, with its international connections, could become a mediator in the restructuring of Raízen.

Forecast and Risks

Debt Restructuring Scenario: The most likely path is an agreement between creditors (a creditors' committee is already being formed) and the company to reduce nominal values/extend repayment terms. This will require 6-12 months of negotiations and a favorable agricultural season in 2026/27.

Capitalization Scenario: An injection of R$ 20 billion from Shell and Cosan is needed (possibly with additional participation from BTG). Political agreements between the parties may delay the decision.

Liquidity Risk: In the event of failed negotiations and lack of capitalization, cash reserves will be depleted by the end of 2027-2028. This could trigger a default or forced asset sale.

Agricultural Performance: Any recovery depends on normal harvest conditions. New climatic shocks or a repeat of drought will make recovery impossible.

Summary: Raízen faces a cross-crisis of management errors (cancellation of financing mechanisms, closure of trading), external factors (agricultural losses, high rates), and institutional constraints (disagreement among owners). The company is not at a critical liquidity point in the short term, but without debt restructuring and new capitalization, it will face a critical crisis by 2027-2028. The negotiation process will be a test for the Brazilian financial system and will affect the energy sector's access to international capital markets.