A Brazilian judge has ruled against Montesanto Tavares Group Participações SA, a major coffee exporter, in its attempt to renegotiate debt with banks and companies, including commodities trader Cargill Inc. The coffee group, which owns companies such as Atlântica Exportação e Importação SA and Cafebras Comércio de Cafés do Brasil SA, sought a 60-day grace period to postpone debt repayments while it negotiated with creditors to avoid bankruptcy.
Despite understanding the financial difficulties faced by Montesanto, the judge explained that the request to delay debt payments was “unreasonable” given the situation. The decision can still be appealed, and the legal process is ongoing.
The ruling is expected to heighten concerns about the financial strain in global coffee markets. Futures prices for arabica beans, which are favored for premium coffee, surged nearly 70% from January to November, reaching their highest levels in more than 40 years. As prices rise, brokers require coffee producers and exporters to increase margin deposits to cover potential losses, adding pressure on companies like Montesanto.
Atlântica Exportação, a key player in the Brazilian coffee market, accounts for 8% of the country’s arabica sales. Together with Cafebras, it owes approximately 530 million Brazilian reais ($87.8 million) in margin calls to creditors, including Cargill, Marex Group, and Banco Pine SA. Additionally, both companies face contracts with top Brazilian banks, with debts totaling around $190 million, based on expected export revenues. Major banks such as Banco do Brasil SA and BTG Pactual SA are among the top creditors. However, none of the creditors have publicly commented on the situation.
As the companies continue to explore legal options, the outcome of this case could have wider implications for the coffee industry, which is already dealing with volatility in commodity prices.
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