Lavoro downgraded to Hold at Canaccord after restructuring agreement

As previously reported, Canaccord downgraded Lavoro (LVRO) to Hold from Buy with a price target of $2.25, down from $5.50, after the company pre-announced Q2 earnings on Wednesday evening and management withdrew its previously issued FY25 financial outlook. Management indicated that it submitted an out-of-court negotiated reorganization plan associated with an agreement tied to the company’s principal suppliers, effectively creating a multi-year inventory financing framework that extends the company’s payment terms and provides short-term financial relief following a sharp deterioration in inventory financing conditions in Q1 in Brazil, the analyst noted. While payment terms with Lavoro’s suppliers have been extended, the challenging financing/interest rate environment in Brazil and currency depreciation in the BRL could create additional challenges over the fiscal year, the analyst tells investors.