Fitch cuts USJ Acucar e Alcool to RD

Fitch Ratings said it downgraded USJ Acucar e Alcool SA’s ratings, including long-term foreign and local currency issuer default ratings to RD from CCC-.

“The downgrade to RD follows a missed payment by USJ, on 9 November, of the coupon and outstanding principal balance of its senior unsecured notes due 2019, estimated by Fitch at $400,000 and $8.7 million, respectively. There is no cure period for repayment. The company also entered a 30-day cure period for its coupon payment of $190,000 on its 2021 bond. USJ also used the option to defer the coupon payment of $13.4 million on its 2023 bond and to pay accrued interest at maturity,” said Fitch in a press release.

The company’s suspension of the coupon and principal payment on the 2019 bond triggers no cross-default clauses with the 2021 and 2023 senior secured notes. “However, there are cross-default clauses with the bank lines, estimated at R$380 million, but in Fitch’s opinion, repayment of bank loans will not be accelerated,” the agency said.

The company’s short-term liquidity position is deteriorating rapidly, and refinancing risks are rising due to increased concentration of short-term debt and the company’s inability to generate positive free cash flow. The recent devaluation of Brazilian real has put added pressure on USJ’s ability to honor dollar-denominated debt, which accounts for 90% of total debt, the agency said.

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