Fitch downgrades Eldorado

Fitch Ratings said it downgraded Eldorado Brasil Celulose SA's long-term foreign- and local-currency issuer default ratings to B from B+, its long-term national rating to BBB-(bra) from BBB+(bra) and the $350 million notes due 2021 issued by Eldorado Intl. Finance GmbH to B/RR4 from B+/RR4. All the ratings were placed on negative watch.

The downgrade follows the announcement that some of the J&F group's executives, including Eldorado parent company J&F Investimentos SA's major shareholders, have signed a plea bargain with the Brazilian Federal Public Prosecutor's Office, which was ratified by the country's supreme court. The agreement establishes the payment of a fine totaling R$225 million to be paid by these executives.

The agency said the magnitude of this agreement, which included admitting payments of bribes to various politicians, and the reputational damage from the investigations due to the size and nature of these payments is likely to hurt Eldorado's ability to obtain financing or sell assets. This has heightened refinancing risk given the company's tight liquidity position.

The negative watch reflects Fitch's expectation that the fine from the anticipated leniency agreement that is being negotiated by the J&F group will further weaken the company's precarious financial position.

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