Fitch: Proposed Rumo/ALL Merger Positive for ALL's Ratings and Neutral for Cosan's

martes 25 de febrero de 2014 16:04 GYT
 

(The following statement was released by the rating agency) RIO DE JANEIRO, February 25 (Fitch) Fitch Ratings views the recently announced merger deal between logistics company Rumo Logistica (Rumo) and railroad operator America Latina Logistica SA (ALL) as potentially positive for ALL's ratings. Fitch also expects the deal to be neutral to the ratings of Rumo's parent Cosan SA Industria e Comercio (Cosan), which will become a major shareholder in the combined company. Yesterday Rumo submitted to ALL a binding proposal for the incorporation of ALL by Rumo. The proposal entails the merger of all shares issued by ALL, of which the current shareholders of Rumo and ALL will be allotted 36.5% and 63.5%, respectively, of the capital stock of the combined company. After the closing of the deal, the main shareholders will be Cosan, with 27.4% of the new entity, Banco Nacional de Deselvolvimento Economico e Social with 7.7%; Texas Pacific Group (TPG) with 4.6%; and Gavea Investimentos with 4.6%. These four entities will build a new Shareholder Agreement for the combined entity, and Cosan will hold nine seats on the board while the other shareholders will each have one. Cosan's good credit profile and a track record of efficiently consolidating assets enhance the new company's shareholder structure. At the same time, Cosan announced a proposal spin-off of its energy and logistics arms. According to the new shareholding structure, Cosan will create Cosan Logistica (a company responsible for the investment in Rumo Logistica and potentially ALL) and Cosan Energia (a company responsible for the investments in Raizen, Comgas, Cosan Lubricants and Radar). As a next step, Cosan may transfer part of its debt to Cosan Logistica, but this course of action has not yet been finalized. Fitch does not expect to take action on Cosan's ratings once the spin off and merger are concluded. Cosan's current rating is mainly based on the credit quality of its assets in the energy segment, and Fitch believes that Cosan Energia's credit profile is unlikely to be affected by the spin off. Nevertheless, the transaction is strategically positive for Cosan Group, as it contributes to broader business diversification and should help to further lessen its cash flow volatility derived from the sugar and ethanol business. This transaction also enhances Cosan's presence in the logistic segment, which currently is one the main focus of Cosan. As of Sept. 30, 2013, Rumo reported EBITDA of BRL 297 million, which represented less than 10% of Cosan's consolidated EBITDA. Fitch views the merger as positive for ALL's credit profile and as a potential trigger for an upgrade of the company's ratings if the deal is closed. The transaction is likely to strengthen ALL's business profile, brings a strong shareholder to its capital and should allow a faster than expected deleverage trend. Fitch understands that ALL and Rumo's businesses are complementary and highly synergic; the deal should benefit the individual business of each company, boosting a potential increase in the combined cash flow generation in the medium term. Additionally, Rumo is expected to present important increases in its EBITDA generation over the next 18-24 months. All's pro forma leverage of the combined company is high, at 4.1x as of September 2013 LTM, according to Fitch's methodology. Fitch foresees that the development of both businesses individually should permit the combined company to present more conservative credit metrics. The new company's net leverage is likely to be close to 3.5x by the end of 2014. Fitch currently rates Cosan and ALL as follows: ALL --Long-term Foreign and Local Currency IDRs 'BB-'; --Long-term National Rating 'A(bra)'; --Long-term National Rating of the 5th Debenture Issue 'A(bra)'; --Long-term National Rating of the 6th Debenture Issue 'A(bra)'; --Long-term National Rating of the 8th Debenture Issue 'A(bra)'; --Long-term National Rating of the 9th Debenture Issue 'A(bra)'; --Long-term National Rating of the 10th Debenture Issue 'A(bra)'. ALL Malha Sul S.A. --Long-term National Scale Rating 'A(bra)'; --Long-term National Rating of the 3rd Debenture Issue 'A(bra)'. ALL Malha Norte S.A. --Long-term National Scale Rating 'A(bra)'; --Long-term National Rating of the 6th Debenture Issue 'A(bra)'. --Long-term National Rating of the 8th Debenture Issue 'A(bra)'. ALL Malha Paulista S.A. --Long-term National Scale Rating 'A(bra)'; --Long-term National Rating of the 1st Debenture Issue 'A(bra)'. The Outlook for the corporate ratings is Positive. Cosan --Foreign and local currency IDRs 'BB+'; --National scale rating 'AA(bra). Cosan Overseas LTD --Foreign currency IDR 'BB+'; --Perpetual notes 'BB+'. Cosan Luxembourg S.A --Senior Unsecured Notes due in 2018 and 2023 'BB+'. The Outlook for the corporate ratings is Stable. Contact: Gisele Paolino Director +55-21-4503-2624 Fitch Ratings Brasil LTDA Praca XV de Novembro, 20 / 401-B Rio de Janeiro, RJ 20010-010 Claudio Miori Associate Director +55-11-4504-2207 Debora Jalles Director +55-21-4503-26129 Wellington Silva Analista +55-21-4503-2606 Media Relations: Elizabeth Fogerty, New York, Tel: +1 (212) 908 0526, Email: elizabeth.fogerty@fitchratings.com. Additional information is available at 'www.fitchratings.com'. 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