OREANDA-NEWS. December 08, 2015. Fitch Ratings does not expect the proposed BRL650 million capital increase at Rumo Logistica S.A. (Rumo) to by itself affect the credit quality of the following Rumo direct and indirect subsidiaries:

--America Latina Logistica S.A. (ALL);
--America Latina Logistica Malha Norte S.A. (ALL Malha Norte);
--America Latina Logistica Malha Sul S.A. (ALL Malha Sul);
--America Latina Logistica Malha Paulista S.A. (ALL Malha Paulista).

Fitch currently rates ALL 'BB-' and 'A(bra)' with a Negative Outlook and its subsidiaries 'A(bra)' with a Negative Outlook. Their unsecured debentures are rated 'A(bra)'.

Rumo announced on Dec. 2, 2015 that its Board of Directors approved the calling of an extraordinary shareholders' meeting to consider and vote on the proposal to increase the company's capital through a private subscription of new shares totaling up to BRL650 million. To be subscribed the shares must ensure proceeds of at least BRL350 million. Once the capital increase is approved the closing of the deal may occur during the first quarter of 2016.

Fitch considers the entrance of the proceeds of the capital increase as positive but insufficient to materially improve Rumo's liquidity and credit metrics. Additionally, the ratings already forecast that the group will present a healthier cash to short-term debt coverage rate during the expressive capex period. Pro forma to the deal, as of September 2015 LTM, this coverage rate was 0.7x, compared to 0.4x before the capital increase. The net leverage ratio (measured by net debt/EBITDA according to Fitch's methodology) would slightly decline to 7.9x, from 8.2x as of September 2015.

ALL's ratings reflect the company's solid business position as a railroad and logistic operator in the Brazilian infrastructure industry. ALL's Negative Rating Outlook reflects the challenges that Rumo still faces to improve its currently aggressive capital structure and finance the huge expansion capex plan of BRL7.9 billion up to 2019 in order to avoid significant pressures in its cash flow amid Brazil's weak macroeconomic and credit environment. Rumo will be challenged to consistently capture increasing volumes and improve operating profitability in order to increase its operational cash flow and delever its consolidated balance sheet.

ALL's ratings are based on the consolidated credit profile of Rumo after it acquired ALL in March 2015. As of September 2015 latest-12-months (LTM), ALL represented about 75% of Rumo's pro forma consolidated EBITDA.