S&P downgrades Cosan's rating and cites Raízen's restructuring

The risk rating agency S&P Global Ratings downgraded Cosan's credit rating from BB- to B+ and maintained a negative outlook for the company. The decision reflects the assessment that the holding company lost strength in its business profile following the restructuring of Raízen's debt and that its capital structure remains under pressure, requiring new asset sales to meet financial commitments.

According to S&P, although the risks of contagion from Raízen's restructuring have decreased and the agency does not expect significant cash contributions or new obligations from Cosan to help the subsidiary, the conversion of part of Raízen's debt into equity participation will significantly reduce the holding company's economic share in the company.

For the agency, this dilution weakens the diversification of Cosan's business, historically one of the main factors supporting its credit profile.

In the report released this Wednesday (8), S&P highlights that Cosan has already carried out a series of operations to reduce debt, including amortizations of around R$9 billion, supported by the subsequent share offering of R$10 billion and by the resources obtained from the Compass IPO.

Still, the agency estimates that interest coverage indicators will remain below 1x over the next two years if the company does not carry out new asset sales. This is because the expected dividends from Rumo, Compass, Moove and Radar would not be sufficient to cover the holding company's financial expenses.

S&P states that the divestment strategy remains surrounded by uncertainties. Cosan's management has already signaled that it intends to reduce net debt to zero and is evaluating alternatives involving relevant assets, such as the stake in Rumo.

In the agency's assessment, however, new sales could further reduce the group's diversification and compromise its ability to generate dividends in the long term, widening the mismatch between cash inflow and debt service.

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Despite the pressure on the credit profile, the agency considers that Cosan's liquidity remains adequate.

The expectation is that, in the next 12 months, cash sources will exceed the use of resources by approximately two times, supported by the consolidated cash position, operational generation and resources obtained from Compass' IPO.

The holding also does not have relevant debt maturities before 2028, according to the report.

The negative outlook reflects the possibility of a further downgrade if Cosan is unable to strengthen its capital structure with divestments or if debt coverage remains below 1x.

On the other hand, S&P could revise the outlook to stable if asset sales simplify the company's financial structure, reduce the interest burden and consistently increase the debt repayment capacity.

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Source: CNN