S&P upgrades Localiza

Standard & Poor's said it raised Localiza Rent a Car SA's corporate credit rating to BB from BB- and Brazilian scale rating to brAA- from brA.

The outlook was revised to stable from positive.

The agency said the upgrade reflects Localiza's strong growth in recent years, which has been contributing to its market share increase; its ability to improve cash flow metrics and to reinforce liquidity after a period of intense investing, with proven access to the domestic capital market and superior cash generation; and Brazil's improved fundamentals, allowing for a more positive environment in rental car and used car sale businesses, which bear strong correlation to economic activity in Brazil.

The ratings also reflect the company's recent, more aggressive growth strategy, which could result in additional leverage; the early phase of the developing car rental industry in Localiza's home market, where the industry is smaller and more fragmented than in developed economies; and Localiza's exposure to the volatile car rental demand in Brazil, S&P said.

These risks are partially offset by the company's dominant position in the country, its strong brand name, its expertise in weathering volatility and the liquidity of its assets (cars), S&P added.

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