Fitch Affirms Cosan's IDRs at 'BB '; Outlook Stable
Cosan Luxembourg S.A and Cosan Overseas Limited are fully-owned subsidiaries of Cosan and the issuances are unconditionally and irrevocably guaranteed by the parent company.
The Rating Outlook for the corporate ratings is Stable.
KEY RATING DRIVERS
Cosan's ratings are supported by its strong and diversified asset portfolio. Fitch expects this portfolio to provide a growing and robust flow of dividends to Cosan in order to cover its interest expenses above 2.0 times (x) and pay a sufficient dividend to support its main shareholder (Cosan Ltd.) debt service. The company's portfolio benefits from the resilience of activities such as distribution of natural gas, sale of lubricants and fuels. The volatile sugar and ethanol (S&E) business has been reducing its participation over Cosan's pro forma consolidated EBITDA, reaching around 30% in 2014, which is positive to its business profile.
The ratings incorporate Cosan's high leverage at the holding level, which is somewhat mitigated by its lengthened debt maturity profile. The analysis has also considered the subordination of this company's debt to obligations of its main investments, as access to their cash is limited to dividends received. Fitch also considered the company's limited exposure to the weaker credit profile of the logistic business, which was recently spun-off from Cosan.
Robust Asset Portfolio
Cosan's three main assets and source of dividends are rated as investment grade. Raizen Combustiveis S.A. (Raizen Combustiveis, rated 'BBB'/'AAA(bra)', Outlook Stable) is the third largest fuel distributor in Brazil, with a predictable operational cash generation. Despite its more volatile results, Raizen Energia S.A. (Raizen Energia, rated 'BBB'/'AAA(bra)', Outlook Stable) is the largest sugar and ethanol company in Brazil and as such it benefits from its large business scale, which somewhat mitigates the current challenging scenario for the sector. Companhia de Gas de Sao Paulo (Comgas, rated 'BBB-'/'AA+(bra)', Outlook Stable) is the largest natural gas distributor in Brazil, with high growth potential and predictable operational cash flow.
All of Cosan's businesses reported improved performance in 2014 compared to the previous year. In 2014, Comgas reported net revenues at BRL6.4 billion and stable EBITDA margin at 22.5%, whereas Raizen Combustiveis reported net revenues of BRL56 billion, favorably comparing to BRL51 billion in the fiscal year ended March 31, 2014. Raizen Energia reported stable revenues and operating margins of BRL9.2 billion and 28%, respectively, in 2014. The other two assets invested by Cosan are Cosan Lubrificantes S.A. and Radar Propriedades Agricolas S.A, which add to business diversification.
High Interest Coverage Expected to Remain
Fitch expects Cosan's investees to increase dividend payments in the next years, with Cosan receiving around BRL1 billion in 2015 and 2016, compared with BRL912 million in 2014. Raizen Combustiveis should keep its growing trends for revenues, with stable EBITDA margin, while Raizen Energia's operational cash flow generation should benefit from expected higher sugar prices and sales volumes. Comgas is also expected to increase dividends distribution as a result of its potential revenue growth.
Cosan's interest coverage should remain above 2.0x, which is adequate for the rating category and allows the company to gradually reduce its debt. In 2014, the ratio dividends received/interest paid was 2.3x. Cosan's access to its main investees is limited to dividends as Raizen Combustiveis and Raizen Energia are jointly controlled by Cosan and Shell. Comgas is a regulated concession and any intercompany loan to shareholders must be approved by regulator.
High Leverage for Cosan
Cosan's current leverage is high on a stand-alone basis. The company reported total adjusted debt of BRL6.8 billion at the end of the first quarter of 2015, and net adjusted debt/EBITDA plus dividends received at 9.8x. Debt was composed mostly of intercompany loans of BRL4 billion, which represent the past bond issuances performed by its fully-owned subsidiaries, and non-voting preferred shares of BRL2 billion Although issued by Cosan Luxembourg and Cosan Overseas, the associated debt at both entities is guaranteed by Cosan, which is ultimately responsible for the payment.
Cosan Not Affected by ALL Acquisition
Cosan's IDRs are not expected to be affected by the weaker credit profile of the logistic arm of its controlling shareholder Cosan Ltd. Rumo Logistica Operadora Multimodal S.A. (Rumo), which was the group's logistic company was spun-off from Cosan in October 2014. The acquisition of America Latina Logistica S.A (ALL, 'BB-'/Stable Outlook) by Rumo has been completed and approved by all relevant Government authorities. Cosan Logistica S.A, 62% owned by Cosan Ltd., holds a 26.26% stake into Rumo. ALL's shares ceased to be traded on the Brazilian Stock Exchange on March 31, 2015 and its figures has been captured by Rumo's and Cosan Logistica S.A's financials since April 1, 2015
KEY ASSUMPTIONS
Fitch's key assumptions within the rating case for the issuer include:
--Cosan will not trigger the perpetual bond's optional redemption clause, preserving its short-term liquidity.
--Fitch expects an increased flow of dividends coming from Comgas, Raizen Combustiveis and Raizen Energia S.A over the next two years, reaching around BRL1 billion per year.
--Potential new issuances will only have the purpose to refinance existing debt.
RATING SENSITIVITIES
Future developments that may, individually or collectively, lead to a negative rating action include the deterioration of the credit profile of Raizen Combustiveis, Raizen Energia and or Comgas and Cosan's interest coverage by dividends received bellow 2.0x.
Future developments that may, individually or collectively, lead to a positive rating action include a more predictable cash flow generation of Raizen Energia and Cosan's interest coverage by dividends received above 3.0x on a sustainable basis.
LIQUIDITY
As of March 31, 2015, the holding company had BRL263 million of cash versus short-term debt of BRL2.2 billion. Cosan's short-term debt position included the USD500 million (BRL1.6 billion) perpetual notes due to the optional redemption clause that can be triggered, at Cosan's option, from Nov. 5, 2015 on. Adjusted for the perpetual notes, Cosan's short-term debt falls to BRL572 million and cash to short-term debt coverage stands at 0.46x.
Cosan's debt maturity profile is well stretched and is not expected to pressure the company's cash flows until 2018 when the BRL850 million notes are due. Fitch expects Cosan to receive growing inflow of dividends by then, which will ensure adequate repayment capacity of upcoming interests. Cosan's liquidity is reinforced by a fully available committed Stand-by Facility of BRL750 million and the positive track record of dividends. The company received dividends of BRL750 million in the LTM ended March 31, 2015.
FULL LIST OF RATING ACTIONS
Fitch has affirmed the following ratings:
Cosan S.A Industria e Comercio
--Foreign and local currency IDRs at 'BB+';
--National scale rating at 'AA(bra)'
The Outlook for Cosan's IDRs is stable.
Cosan Overseas LTD
--Perpetual notes at 'BB+'.
Cosan Luxembourg S.A:
--Senior Unsecured Notes due in 2018 and 2023 at 'BB+'.
Комментарии