Fitch puts four Brazil sugar companies on watch

Fitch Ratings said it placed the existing corporate ratings of Biosev SA, Jalles Machado SA, Tonon Bioenergia SA and USJ – Acucar e Alcool SA on Rating Watch negative.

The ratings on negative watch include Biosev’s foreign- and local-currency issuer default ratings of BB- and long-term national scale rating of A+(bra).

Jalles Machado’s foreign- and local-currency issuer default ratings of BB- also were placed on negative watch, along with its long-term national scale rating of A+(bra).

Fitch also placed on negative watch USJ – Acucar e Alcool’s foreign- and local-currency issuer default ratings of B+, long-term national scale rating of A-(bra) and the B+ rating on its $275 million senior unsecured notes due 2019 with a recovery rating of RR4.

Also on negative watch include Tonon Bioenergia’s foreign- and local-currency issuer default ratings of B, the B ratings on its $300 million senior unsecured notes due 2020 with recovery rating of RR4 and the B rating with recovery rating of RR4 on the $230 million senior secured notes due in 2024 issued by Tonon Luxembourg SA.

The negative watch reflects increased systemic risk in the Brazilian sugar and ethanol sector for issuers following the default by Aralco SA Industria e Comercio and Virgolino de Oliveira SA.

The negative watch also considers news that Acucar e Alcool’s is considering a debt restructuring, Fitch said.

These actions have made it increasingly difficult for companies to obtain working capital financing and to secure sugar cane from third parties, the agency said.

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