August 22, 2019 / 3:37 PM / a month ago

Brazil's Imcopa unable to terminate Petrópolis lease early, court says

SAO PAULO (Reuters) - A Brazilian judge on Wednesday ruled that Imcopa, one of the country’s largest processors of non-genetically modified soybeans, will no longer be able to enforce early termination of a lease agreement related to two soy crushing plants.

Imcopa has been going through a bankruptcy reorganization since 2014 and wants to sell the plants to pay back creditors. Last week, Imcopa terminated a 10-year lease on the two plants with brewer Cervejaria Petropolis SA, prompting the beer maker to seek legal remedies.

Petrópolis had been operating the plants to produce and market soy meal and soy oil.

Citing the injunction handed down by Judge Sandra Dal’Molin in southern Paraná state, Petrópolis said in a statement on Thursday that Imcopa would have to pay fines if it did not comply with the decision barring the early termination of the lease.

Imcopa, which may appeal the decision, did not immediately respond to a request for comment. But it said last week that its bankruptcy plan, approved in 2017, provides for the sale of the industrial operations at auction, without elaborating.

Imcopa has capacity to crush 1.5 million tonnes of soybean per year, producing up to 240,000 tonnes of soy protein concentrate, according to its website. Brazil is expected to crush 43.2 million tonnes of soybeans this year.

In a memo sent to employees and suppliers on Aug. 14 and seen by Reuters, Imcopa said its decision this month to rescind the contract was due to Petrópolis’ “breach of contract.”

Representatives of the brewer told Reuters last week Imcopa’s owners were trying to end the arrangement in order to sell the plants, denying any breach.

In terminating the lease, Imcopa gave Petrópolis 120 days to remove all raw material, inputs and equipment from the plants, located in the towns of Araucária and Cambé.

According to the terms of the Wednesday injunction seen by Reuters, Petrópolis claimed before the court that the 10-year agreement stipulated $6 million in half-yearly payments to Imcopa.

The ruling, citing information provided by Petrópolis, said that between the years of 2015 and 2018 the parties had signed amendments to the original contract “to set dates and payment values.”

In 2019, however, the parties could not reach an agreement on payments, leading Imcopa to terminate the contract unilaterally, the ruling said.

Petrópolis had been “responsible” for crushing soy at the Imcopa plants since the latter company filed for bankruptcy protection, Petrópolis said last week.

Reporting by Ana Mano; editing by Jonathan Oatis

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