S&P downgrades Natura

S&P said it lowered the global scale corporate credit rating on Natura Cosmeticos SA to BB from BB+ and its national scale corporate credit and issue-level ratings to brA+ from brAA.

The ratings were removed from CreditWatch negative, where they were placed on June 9.

The outlook on both scales is now negative.

The agency kept the recovery rating of 3 on Natura's senior unsecured debt, reflecting an expectation of meaningful recovery (50%).

S&P said the downgrade reflects the sharp increase in Natura's leverage once it completes the acquisition of TBS, for which the company will raise R$3.7 billion in debt, given that it will be 100% debt financed.

As a result of this new debt and the acquired operations of TBS, the agency expects Natura to post debt to EBITDA close to 3.5 times in 2017 (pro forma for the acquisition) and around 3 times in 2018, compared with around 1.7 times in 2016.

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