Moody's cuts Votorantim to junk

Moody's Investors Service said it downgraded Votorantim Celulose e Papel SA's corporate family rating to Ba1 from Baa3 on the global scale and to Aa2.br from Aa1.br on the Brazilian national scale.

The outlook is negative. This action concludes the review that began on Oct. 15.

According to the agency, the downgrade follows the conclusion of the company's acquisition of the interests of Arapar SA and Arainvest SA in Aracruz Celulose SA (Ba1/ negative) for R$5.42 billion in cash, making it the controlling shareholder.

The downgrade incorporates its higher leverage as measured by debt-to-EBITDA ratio, which could peak at about 9x at fiscal year-end 2009 if pulp prices remain at the current low level through the rest of the year, Moody's said.

The company's Ba1 rating also reflects its leading position as the largest producer of market bleached eucalyptus kraft pulp in the world, its extremely competitive production costs and efficient logistics, the agency said.

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