Fitch downgrades USJ Acucar

Fitch Ratings said it downgraded USJ Acucar e Alcool SA's foreign- and local-currency long-term issuer default ratings to C from CC and national scale rating to C(bra) from CC(bra).

Fitch also said it downgraded USJ's outstanding $197 million senior secured notes due 2021 and $29 million senior unsecured notes due 2019 to C with recovery rating of RR4 from CC with recovery rating of RR4.

The downgrades reflect news of USJ's private exchange offer for any and all of its outstanding senior unsecured notes due 2019 and 12% senior secured PIK toggle notes due 2021 for newly issued notes due 2023, the agency explained.

USJ's credit profile is pressured by its operations in the very volatile sugar and ethanol (S&E) sector with above-average industry risks, Fitch said.

The ratings reflect the company's much weaker liquidity and capital structure than Jalles Machado SA, whose cash to short-term debt coverage ratios are higher than 1x and whose net adjusted leverage is lower than 2x, the agency said.

The ratings compare unfavorably with those of Biosev SA, which improved liquidity and brought leverage down to 2.9x in 2018, Fitch said.

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