Fitch upgrades USJ notes

Fitch Ratings said it upgraded USJ – Acucar e Alcool SA's $29 million senior notes due 2019 to CCC+/RR3 from CCC/RR4 and affirmed its foreign- and local-currency long-term issuer default ratings at CCC, national scale rating at CCC(bra) and $197 million senior secured notes due 2021 at CCC+/RR3.

The agency said the upgrade of the unsecured notes reflects the good recovery prospects that stems from USJ's unique position as one of the largest land owners in the sugar and ethanol sector. The company has land properties worth R$1 billion in the State of Sao Paulo, of which 70% is unencumbered. It also counts on operating assets such as sugar cane and readily marketable inventories that could be used for collateral to improve its financial position.

The affirmation of the remaining ratings incorporates Fitch's concerns about USJ's ability to meet its financial obligations as access to long-term funding remains scarce for distressed Brazilian sugar and ethanol companies. The sale of land that could alleviate liquidity pressures has not materialized as anticipated.

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