October 3, 2016 / 8:22 PM / 2 years ago

Fitch: Cosan's Rating Unchanged by Sale of Radar

(The following statement was released by the rating agency) SAO PAULO, October 03 (Fitch) Cosan S.A. Industria e Comercio's (Cosan) announced sale of a majority portion of its 39% interest in Radar Propriedades Agricolas S.A (Radar) does not impact its ratings, according to Fitch Ratings. The agency's affirmation of Cosan's ratings in June 2016 incorporated the positive impact the potential sale would have on the company's credit metrics. The transaction is expected to strengthen Cosan's liquidity position and contribute to the deleverage trend initiated in 2016. The announced transaction amount is BRL1.1 billion and Cosan will use proceeds to pay down debt at the holding company level. Fitch also does not anticipate any material change on Raizen Energia S.A.'s (Raizen Energia) cost structure, at least in the medium term, due to potential increase on rental expenses for the land used to the plantation of sugar cane. Raizen Energia is one of the main businesses for Cosan. Fitch expects Cosan to receive a robust inflow of dividends that along with the proceeds from the sale should provide adequate debt service coverage ratio. As of June 30, 2016, the holding company had BRL422 million of cash versus short-term debt of BRL733 million, yielding a cash-to-short-term debt coverage of 0.6x. Cosan's liquidity is also reinforced by a fully available committed Stand-by Facility of BRL750 million. The sale is expected to contribute to the deleveraging of Cosan as proceeds will be used to pay down debt and will offset the impact of an expected reduction of Cosan's dividends inflow on its leverage ratios. The company reported net adjusted debt of BRL5.8 billion and total dividend inflow of BRL1.5 billion in the last 12 months ended June 30, 2016, bringing down the ratio of net adjusted debt-to-EBITDA plus dividends received to 4.4x, comparing favorably with 4.9x reported for the previous quarter. On a pro forma basis, excluding dividends received from Radar and considering the cash inflow from the sale, this ratio would be 3.6x. On Sept. 30 2016, Cosan announced it intends to sell part of its 39% stake in Radar for a total amount of BRL1.1 billion to Mansilla Participacoes Ltda, the financial vehicle of TIAA - Teachers Insurance and Annuity Association of America Investment Fund, already a shareholder of Radar. Radar is engaged in land development and rural real estate and has a total land bank of BRL2.7 billion besides BRL2.9 billion of third party's land under management. The transaction is still subject to approval from government authorities. Fitch currently rates Cosan as follows: Cosan S.A Industria e Comercio: --Long-Term Foreign Currency IDR 'BB+'; Outlook Negative --Long-Term Local Currency IDR 'BB+'; Outlook Stable --National scale rating 'AA+(bra)'; Outlook Stable Cosan Overseas Limited: --Perpetual notes 'BB+'. Cosan Luxembourg S.A.: --Senior unsecured notes due in 2018, 2023 and 2027 'BB+'. Contact: Primary Analyst Claudio Miori Associate Director +55-11-4504-2207 Fitch Ratings Brasil Ltda Alameda Santos, 700 - 7th floor Sao Paulo, SP, CEP 01418-100 Secondary Analyst Gisele Paolino Director +55-21-4503-2624 Media Relations: Elizabeth Fogerty, New York, Tel: +1 (212) 908 0526, Email: elizabeth.fogerty@fitchratings.com. Additional information is available on www.fitchratings.com ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEB SITE AT WWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. 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