S&P may cut Votorantim Celulose, up Aracruz Celulose

Standard & Poor's said it placed the BBB corporate credit rating on Votorantim Celulose e Papel SA on CreditWatch with negative implications and the BB corporate credit rating on Aracruz Celulose SA on CreditWatch with positive implications.

The watch follows VCP's announcement that it has reached an agreement to acquire 28.03% of the voting shares of Aracruz held by Arapar SA (unrated) for R$2.71 billion.

"We expect the larger scale of the new entity to generate synergies and cost savings in administrative expenses, production, capital investments and logistics, improving the company's cost position and business profile," S&P analyst Marcelo Costa said in a statement.

"However, the significant increase in leverage resulting from the share acquisition and from the losses Aracruz has reported in its derivative position would raise financial risk at the new company."

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