AgroGalaxy files for judicial reorganization due to BRL 1.5 billion debt

On Wednesday, September 18, 2024, AgroGalaxy, a major Brazilian agricultural input distributor, filed for judicial reorganization. The filing, submitted under seal, will be subject to shareholder assembly ratification, according to the company.

In Brazil, judicial reorganization is a legal process used by companies to avoid bankruptcy. It allows businesses to suspend and renegotiate portions of their accumulated debt during a crisis, preventing closures, layoffs, and payment failures.

The primary objective of judicial reorganization is to present a viable recovery plan to creditors, showing that the company can recover if it renegotiates its debts. Once the plan is approved, most of the company's debts are suspended, allowing it to focus on paying employees, taxes, and raw material suppliers, which are essential to its operations.

AgroGalaxy has been facing financial difficulties due to falling commodity prices, high interest rates, and climate change. The company had previously announced restructuring measures, including cost cuts and debt renegotiations. According to AgroGalaxy, the goal of the judicial reorganization is to protect the company and its subsidiaries "until it is possible to implement the resolution of its indebtedness and adjust its capital structure." The company explained that this was the best way to "ensure the sustainability of the AgroGalaxy Group, fulfill its commitments, and continue providing top services to our clients (...) allowing the continuity of our activities."

In the second quarter of this year, AgroGalaxy posted a loss of BRL 362 million and had a net debt of BRL 1.5 billion. Before announcing the reorganization request, AgroGalaxy had already reported the resignation of its president, Axel Jorge Labourt, after just six months in the position. Additionally, five other members of the company's board of directors resigned.

Following Labourt’s departure, the company is now led by its current Chief Financial Officer and Investor Relations Director, Eron Martins. According to the company, Martins will also be supported by LCSCS Consultoria while simultaneously handling the CEO position and his existing roles in finance and investor relations. "AgroGalaxy tried every possible avenue to avoid going to court, but this step is necessary to protect the business and, more importantly, to allow the company to continue working alongside farmers," stated Eron Martins.

Eron Martins

Earlier in the day, AgroGalaxy was due to repay BRL 70 million in debt amortization to investors. Facing cash flow difficulties, Aqua Capital, the controlling shareholder, opted for the legal route after months of searching for financial alternatives. In an official statement, the company announced that Martins will oversee the implementation of a new business restructuring plan, although no specific details were provided. "AgroGalaxy will also adopt additional measures to enhance operational efficiency, focusing on reducing fixed costs, improving its product mix, and optimizing working capital, particularly in inventories and receivables, to ensure the company's medium- and long-term sustainability," the statement read.

"We will conduct the entire process with transparency and respect for all stakeholders, especially rural producers. We are confident that the relationships we have built with our customers and suppliers will provide the foundation needed to face this challenge and continue strengthening Brazilian agribusiness," concluded Eron Martins.

(Editing by Leonardo Gottems, reporter for AgroPages)