S&P upgrades USJ Acucar e Alcool

S&P said it raised the global scale issuer credit rating on USJ Acucar e Alcool SA to CCC + from SD (selective default).

The agency also said it raised the ratings on the company's unsecured debt to CCC- from D and assigned a recovery rating of 6.

On May 24, USJ concluded an exchange on its outstanding notes due 2019 and 2021 after the bondholders accepted the exchange, S&P explained.

The upgrade reflects the relief in the company's liquidity pressures following the conclusion of the debt exchange offer, the agency said.

The company exchanged 69.95% of the 2019 notes and 98.4% of the 2021 notes for new 2023 notes, amounting to $257.7 million, S&P said.

The new notes have a payment-in-kind feature for the next coupon payment with a coupon rate of 10.5%, the agency said, and a second payment with the option to pay a coupon of 4.2% in cash and the remaining 6.3% accrued.

After the first two payments, the company will begin paying cash interest with a coupon rate of 9.875%, the agency noted.

S&P said it continues to view USJ's capital structure as unsustainable in the medium term, reflected in the CCC+ issuer credit rating.

However, the company will have enough funds to comply with its obligations for the next 12 to 18 months, which include the amortization of the outstanding amount of the 2019 bond, the agency said.

The negative outlook reflects a view of a still unsustainable capital structure in the medium term, although the agency said it believes the company will have enough funds to comply with its obligations for the next 12 to 18 months, S&P said.

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