Fitch lowers Tonon Bioenergia

Fitch Ratings said it downgraded Tonon Bioenergia SA’s foreign- and local-currency issuer default ratings to CCC from B-.

Fitch also said it downgraded the ratings on fully-owned subsidiary Tonon Luxembourg SA’s $300 million senior unsecured notes due 2020 to CCC with recovery rating of RR4 from B- with recovery rating of RR4, along with the rating on the $230 million senior secured notes due 2024 to CCC with RR4 recovery rating from B- with RR4 recovery rating.

The Rating Watch negative also was removed.

The downgrades reflect concerns about Tonon’s short-term liquidity position and escalating refinancing risks due to its inability to generate positive free cash flows, Fitch said.

The company has not reported any improvement of its capital structure in the past month and faces a May 24 coupon payment of $12 million for its $230 million senior secured notes due 2024.

Systemic risk remains high for Brazil’s sugar and ethanol sector due to numerous defaults within the sector, the agency said.

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