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April 29, 2008 |
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COSAN SA: ExxonMobil Deal Cues Moody's Rating Review Moody's Investors Service has placed the Ba2 local currency corporate family rating and foreign currency senior unsecured rating, as well as the A1.br Brazilian national scale corporate family rating of Cosan S.A. Industria e Comercio on review for possible downgrade. "The review of Cosan's ratings was prompted by the announcement that Cosan has signed a share purchase agreement with ExxonMobil International Holdings B.V., to purchase ExxonMobil's fuel distribution and lubes assets in Brazil (Esso) at a price of of US$826 million, in addition to the assumption of US$163 million in net debt and net related-party receivables of US$35 million," said Moody's Vice President Senior Analyst Soummo Mukherjee. "While the acquisition of such assets should benefit Cosan's credit profile by diversifying its operating activities providing it with a more integrated platform and reducing the volatility of its cash flows, this transaction will lower Cosan's overall operating margins and depending on how the transaction is financed, total leverage as measured by debt to EBITDA could increase," added Mr. Mukherjee. The company has announced that it will use the US$310 million proceeds from its recent capital increase by minority shareholders as part of financing for this transaction, while the remainder might be financed by a combination of debt and new equity investors. The review will primarily focus on exploring in greater detail the strategic rationale of this transaction and a longer-term view of Cosan's operations together with the new acquired assets. The review will also explore the exact financing structure for this transaction and the degree that it may economically or financially impact Cosan' business and credit profile. Depending on the additional information obtained during Moody's review process, Cosan's ratings could either be confirmed at the current Ba2 level with a stable outlook, confirmed with a negative outlook, or downgraded to a lower rating category. Ratings placed on review for possible downgrade: -- Global local currency scale corporate family rating: Ba2 -- US$36 million of guaranteed senior unsecured notes due 2009: Ba2 -- US$400 million of guaranteed senior unsecured notes due 2017: Ba2 -- US$450 million of guaranteed senior unsecured perpetual notes: Ba2 -- Brazilian national scale corporate family rating: A1.br Headquartered in Piracicaba, Brazil, Cosan S.A. Industria e Comercio produces sugar and ethanol. The company cultivates harvests and processes sugarcane, the main raw material for sugar and ethanol manufacturing. With 17 manufacturing units and two port terminals in the city of Santos, Cosan says it is currently the largest individual group in the world in terms of sugarcane byproducts manufacturing. With capacity to grind more than 40 million tonnes of sugarcane, the group represents 12% of overall production in the mid-southern region of the country. |
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