S&P lowers Eldorado Brasil

S&P said it lowered the global scale corporate credit rating on Eldorado Brasil Celulose SA to B- from B+, along with the national scale rating to brB- from brBBB.

The ratings remain on CreditWatch negative.

S&P also said it lowered the senior unsecured ratings on Eldorado's debentures to brB- from brBBB and its 2021 bond issuance to B- from B+.

The agency also revised the recovery ratings to 4 on these debts, indicating 35% expected default recovery, from 3.

The company's controlling holding company, J&F Investimentos SA (J&F), reached a leniency agreement, which is pending Supreme Court's approval, to pay a R$10.3 billion fine over the next 25 years, S&P said.

Under the agreement terms, Eldorado is not liable for the fine and won't upstream any cash to J&F related to it, the agency said.

The downgrades reflect Eldorado's higher refinancing risks and weak governance standards, stemming from the corruption scandal that damaged Eldorado's and J&F's reputation, S&P said.

The downgrades also consider the latest developments in the corruption investigation and a belief that it could add risks to the company's financial flexibility and refinancing activities, given the high concentration of short-term debt maturities, the agency said.

But the company's cash flow generation is improving, S&P said.

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