Moody's may upgrade Votorantim Celulose

Moody's Investors Service said it placed under review for possible upgrade Votorantim Celulose e Papel SA's Baa3 global-scale issuer rating and Aa1.br Brazilian national scale issuer rating.

The agency said the rating action reflects the high probability that Votorantim Celulose will become the controlling shareholder of Aracruz Celulose SA and the expected merger of the two companies The increased size and operational diversity of the resulting company, combined with the potential for synergies and sale of non-core assets, would likely support a higher rating for Votorantim Celulose, in Moody's view.

The ratings could be upgraded if the merger is successfully completed; if Aracruz's derivatives losses and other sources of increased leverage, such as the acquisition financing and capex, do not cause the expected 2009 combined retained cash flow-to-debt ratio to drop significantly below 20%; and if liquidity remains adequate, Moody's said.

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