SAO PAULO--(BUSINESS WIRE)--Fitch Ratings considers the decision by Brazil's anti-trust regulator CADE to approve the merger of shares issued by America Latina Logistica SA (ALL) into Rumo Logistica Operadora Multimodal S.A (Rumo) to be credit neutral to Cosan Limited (Cosan Limited)'s and to Cosan S.A. Industria e Comercio's (Cosan)'s ratings. Cosan Limited ratings already incorporated the likelihood of this transaction being approved and given the full segregation between the energy and logistics segments within Cosan Limited's group, the ratings of Cosan are not affected.
Brazil's anti-trust regulator CADE approved on Feb. 11 2015, by unanimous decision, the merger of ALL into Rumo. CADE has not imposed any financial restrictions or required asset sales upon the approval, but required certain behaviors, in order to eliminate competition-related issues. This refers to concerns of traders and sugar and grain producers over a likely monopoly on railway access to the port of Santos. Per CADE's restriction, the new company should guarantee third-party access to Cosan's two dry bulk terminals at the Santos Port, ensure equal service to rail freight transportation users, transparent pricing and limit the use of rail freight transportation services by related parties. The deal has been discussed since February 2014 when Cosan submitted a binding proposal to ALL's shareholders for the incorporation of ALL by Rumo.
The merger is strategically positive for the 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 the Group's presence in the logistic segment, which currently is one of its main focus. While it does not affect Cosan Limited's ratings, Fitch will be monitoring both ALL and Rumo and a negative rating action could arise depending on the realization of a potential sizeable capex program at ALL.
Following CADE's approval, Cosan Logistica S.A (Cosan Logistica) will hold 27.38% of Rumo's shares, which will own the totality of ALL's shares. Cosan Logistica was created in October 2014 with the floating of its shares on the BM&FBOVESPA exchange. The creation of Cosan Logistica followed the spin-off of Cosan's logistic assets and full segregation between its energy and logistics businesses.
Fitch Ratings considers Cosan Limited's leverage to be manageable on both a consolidated and stand-alone basis. Cosan Limited reported consolidated net adjusted debt/EBITDAR of 4.0x for the LTM ended Sept. 30, 2014. Fitch incorporates the dividends received from joint ventures Raizen Energia S.A. and Raizen Combustiveis S.A., as well as tax financing and intercompany loans. At the holding company level, Cosan Limited's leverage measured as net debt-to-EBITDA plus dividends received was 3.7x.
Fitch currently rates Cosan, its related debt and Cosan Limited as follows:
Cosan S.A. Industria e Comercio
--Foreign and local currency IDRs at 'BB+';
--National scale rating at 'AA(bra)'.
Cosan Overseas LTD:
--Perpetual notes at 'BB+'.
Cosan Luxembourg S.A:
--Senior Unsecured Notes due in 2018 and 2023 at 'BB+'.
Cosan Limited
--Foreign and local currency IDRs at 'BB';
The Outlook for the corporate ratings is Stable.
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research:
--'Corporate Rating Methodology' (May 28, 2014);
--'National Scale Ratings Criteria' (Oct. 31, 2013).
Applicable Criteria and Related Research:
Corporate Rating Methodology - Including Short-Term Ratings and Parent and Subsidiary Linkage
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=749393
National Scale Ratings Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=720082
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