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Brazil Judge Rules Against Coffee Exporters Facing Debt ‘Crisis’

By Dayanne Sousa
A farmer checks on coffee plants destroyed by frost during extremely low temperatures near Caconde, Sao Paulo state, Brazil, on Wednesday, Aug. 25, 2021. Extreme weather is slamming crops across the globe, bringing with it the threat of further food inflation at a time costs are already hovering near the highest in a decade and hunger is on the rise. Photographer: Jonne Roriz/Bloomberg (Jonne Roriz/Bloomberg)

(Bloomberg) -- A Brazilian judge ruled against major coffee exporter Montesanto Tavares Group Participações SA, which has been attempting to renegotiate debt owed to banks and firms including commodities trader Cargill Inc.

Companies owned by the coffee group — Atlântica Exportação e Importação SA and Cafebras Comércio de Cafés do Brasil SA — were denied their joint request for a 60-day grace period on debt repayment as they negotiate with creditors in order to avoid filing for bankruptcy. The decision came from Judge Murilo Silvio de Abreu, and the initial ruling can still be appealed.

“I understand the plaintiffs’ crisis situation, which has been well demonstrated, but to require such creditors to bear the burden for 60 days, with all due respect, is unreasonable,” the judge said in a Dec. 3 ruling seen by Bloomberg News. 

The latest move is likely to increase concerns over mounting financial stress in global coffee markets. 

Futures prices for arabica beans — the variety favored for high-end brews — have been on a rampage, jumping around 70% between January and late November to the highest in more than four decades. When prices rise, brokers require coffee producers and exporters to put up more cash in the form of margin deposits to cover possible losses.

Atlântica has said it accounts for 8% of Brazil’s arabica sales. The firm, as well as sister company Cafebras, are owned by Montesanto. Lawyers representing the parent group said the companies are studying next steps to be taken in the legal process.

Court documents filled by Montesanto show a list of companies to which Atlântica and Cafebras owe about 530 million Brazilian reais ($87.8 million) in the form of margin calls. That list includes Cargill as well as Marex Group and Banco Pine SA among the main creditors. 

Cargill, Marex and Banco Pine declined to comment.

In addition to margin commitments related to coffee derivatives, Atlântica and Cafebras also listed among their main creditors some of the top banks in Brazil. The companies had signed contracts with the banks based on anticipated export revenue.

The total was about $190 million for those contracts with banks including Banco do Brasil SA and BTG Pactual SA listed as top creditors. Banco do Brasil and BTG Pactual declined to comment.

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