Lavoro requests ″Out-of-Court″ recovery for BRL 2.5 billion debts

The Brazilian input distributor giant Lavoro has announced the initiation of an out-of-court debt recovery process, amounting to BRL 2.5 billion (approximately USD 455 million). This process was detailed in a document filed with the United States Securities and Exchange Commission (SEC), where the company’s shares are traded on the Nasdaq electronic stock exchange.

The company claims to have already secured approval from major creditor groups, such as the agrochemical suppliers BASF, FMC, and UPL, which represent nearly 40% of Lavoro's total debts. According to information gathered by AgroPages, the main creditors have already endorsed the plan, which is now being reviewed by courts in the Brazilian state of São Paulo.

Lavoro CEO, Ruy Cunha, explained that negotiations are underway to secure agreement from over 50% of all creditors within 90 days. According to Cunha, this is a ″crucial moment for stabilizing the situation,″ and he is confident that the debt resolution will be concluded ″quickly.″

The out-of-court recovery being negotiated involves only suppliers in the Brazilian distribution division. The plan also includes Perterra, a Lavoro group company responsible for importing generic inputs sold in its stores.

With this arrangement, the Latam operation, which handles distribution in other Latin American countries, and the Crop Care division, which produces inputs, are excluded from the process. Debts with financial creditors, reaching another BRL 1.2 billion, have been separately renegotiated through bilateral agreements with banks and financial institutions.

Public debt investors in Lavoro will not be affected, Cunha stated. The amount owed to these creditors reaches BRL 420 million, and the company’s proposal is to maintain payments as contracted.

The judicial recovery plan presented by Lavoro to the São Paulo State Court of Justice entails extending payment deadlines and putting in place a multi-year inventory financing model. The goal, according to the company, is to ensure the continuous supply of products, while simultaneously reducing the risks of disruptions to the supply chain .

According to Cunha, the company aims to regain the trust of suppliers and make them part of the solution to meet future commitments. The approach divides these creditors into five categories, offering each different timelines for paying overdue debts.

Second-Quarter Results

Lavoro released its second-quarter "crop year" numbers, which in Brazil correspond to the period from October 2024 to December 2024, with total revenue of BRL 2.25 billion. This result represents a 27% decrease, compared to the same period the previous year, when it recorded revenues of BRL 3.065 billion.

According to Lavoro, the decline was ″due to inventory shortages in Brazil's agricultural retail sector, leading to reservation cancellations and indirectly impacting Crop Care’s revenues.″ Also, consolidated gross profit was BRL 366.9 million, a 28% reduction compared to the second quarter of the previous fiscal year. In Brazil’s retail operations, revenues fell 30%, reaching BRL 1.84 billion, and the gross margin shrank by 240 basis points, settling at 11.5%.

Additionally, the Crop Care segment recorded revenues of BRL 251.5 million, a drop of 30% compared to the same quarter of the previous crop year. The company cited two primary factors for the contraction: regulatory uncertainties in the biological market and the cancellation of orders from Crop Care subsidiaries, Union Agro and Cromo, due to a product shortage by Lavoro Brazil.

(Editing by Leonardo Gottems, reporter for AgroPages)