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ECONOMY | 03-06-2023 08:25

Viterra-Bunge deal to rescue Argentine soy giant Vicentin is now at risk

Deal to rescue Vicentin SAIC, one of the biggest suppliers of soybean meal fed to livestock herds around the world, at risk of falling apart because of court delays.

A deal to rescue one of the biggest suppliers of soybean meal fed to livestock herds around the world is at risk of falling apart because of court delays and Argentina’s worst drought in living memory.

The bankruptcy of Vicentin SAIC more than three years ago upended oilseed trading in Argentina, the top exporting nation of meal and of soy oil used in food and biofuels. After a tumultuous default that featured a botched nationalisation and accusations of fraud by international lenders, Vicentin finally seemed to have secured its future.

Creditors and crop suppliers agreed to restructure US$1.3 billion of debt with a consortium led by Glencore Plc-backed Viterra and Bunge Ltd set to take over operations. That would breathe new life into a company that was the crown jewel of Argentine soy processing before it was toppled by mismanagement and upheaval in national politics.

But drawn-out proceedings in a provincial bankruptcy court and a brutal drought have combined to put the deal at risk, Estanislao Bougain, a Vicentin board director, said in an interview.

At stake is the future of a firm whose credit-fueled expansion before its collapse helped it fend off multinationals like Cargill Inc. The delay also comes at a time when Bunge and Viterra are in merger talks, and their biggest overlap is Argentine soybean crushing, according to Goldman Sachs Group Inc.

Judge Fabian Lorenzini is taking much longer than usual to rubber-stamp the restructuring, Bougain said. Vicentin met the court’s deadline a year ago to reach an agreement with debtors — including major banks like Rabobank and Credit Agricole, as well as grain brokerages across the Argentine Pampas.

Lorenzini’s court declined to comment.

Judicial sluggishness — which, to be sure, isn’t uncommon in Argentina — comes at a time when the smallest soybean harvest this century is weakening Vicentin’s last lifeline: charging rivals a fee to process soy at its plants. That revenue stream is drying up because there isn’t enough soy around now to warrant contracting extra capacity.

If the judge continues to put off a decision, a downward spiral would ensue, according to Vicentin, where idled plants fall into disuse and hundreds of workers have to be let go. That could imperil the company’s takeover. 

Viterra said it remains committed to Vicentin’s restructuring plan. Bunge declined to comment.

“The drought means companies are no longer bringing their grain to Vicentin,” Bougain said. “We’re running low on work but our overheads are still there. There’s no time left.”

by Jonathan Gilbert, Bloomberg

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