Moody's drops Aracruz

Moody's Investors Service said it has downgraded the ratings of Aracruz Celulose SA to Ba2 (corporate family rating) from Baa3 (issuer rating) on its global-scale and to A1.br from Aa1.br on the Brazilian national-scale, and the ratings remain under review for possible further downgrade.

Moody's said it had initiated a rating review of Aracruz on Oct. 3 after the announcement by Aracruz of substantial potential losses from currency derivatives transactions, as well as the planned merger into Votorantim Celulose e Papel SA (Baa3 / Aa1.br under review for downgrade), and on Oct. 15 Aracruz's issuer ratings were lowered to Baa3 from Baa2 on its global-scale and to Aa1.br from Aaa.br on the national-scale.

The rating action reflects Moody's view of increased liquidity pressure deriving from its outstanding foreign currency derivatives transactions.

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