Fitch downgrades USJ

Fitch Ratings said it downgraded the foreign- and local-currency issuer default ratings of USJ – Acucar e Alcool SA to CCC from B, along with the rating on its $275 million senior unsecured notes due 2019 to CCC with recovery rating of RR4 from B with recovery rating of RR4.

Fitch also said it downgraded the national scale rating to CCC(bra) from BBB(bra) and removed the company’s ratings from negative watch.

Key concerns regarding USJ’s liquidity issues have not registered major developments since the last rating action, Fitch said, while Brazilian macroeconomic environment deteriorates and default risks in the sugar- and ethanol-sector continue to intensify.

The availability of working capital financing has become scarcer for Brazilian companies in this industry and restructuring of other companies in the sector increased systemic risk considerably, the agency said.

The company has presented weakening financial profile due to negative free cash flow generation and increased short-term debt concentration, Fitch added.

Prices for sugar and ethanol also are expected to remain under pressure despite improvements on the ethanol industry dynamics in 2015 compared to 2014, the agency said.

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