Fitch: Acquisition of a 5.7% Share in ALL Should Not Affect Cosan's Ratings

RIO DE JANEIRO--(BUSINESS WIRE)--The ratings assigned by Fitch to Cosan S/A Industria e Comercio (Cosan) and its subsidiaries Cosan Combustiveis e Lubrificantes Ltda (CCL), Cosan Overseas Limited (Cosan Overseas), Cosan Lubrificantes e Especialidades Ltda (CLE), CCL Finance Limited (CCL Finance) and Cosan Finance Limited (Cosan Finance) may not be affected by the announcement of an agreement for the acquisition of shares of America Latina Logistica S/A (ALL; Issuer Default Rating [IDR] of 'BB-'; National Scale Rating 'A(bra)'), equivalent to 5.7% of the company's total capital, for BRL896.5 million.

After the conclusion of this acquisition, Cosan will hold 49% of the shares of the company's controlling block. The transaction is still dependent on the approval from other signatories of ALL's shareholders agreement and also from the Brazilian Transport Regulatory Agency (ANTT) and the Brazilian Antitrust Council (CADE).

Cosan's financial profile should not be materially affected by the acquisition, which is expected to be paid in cash, with the company's own resources and/or resources from financial investors that eventually join Cosan in this transaction. The acquisition of a shareholding participation in ALL will strengthen Cosan's presence in the logistics segment, in which the company already operates via its subsidiary Rumo Logistica S.A.. This company also has a contract up to 2028 with ALL for the sugar transportation. On a pro forma basis, for the latest 12-month (LTM) period ended Dec. 31, 2011, and disregarding the entry of other investors, Cosan's consolidated net debt/EBITDA ratio would be 2.3 times (x), which compares to the 1.9x reported.

Fitch expects Cosan to manage its growth strategy with discipline, in order not to excessively pressure its capital structure and leverage levels. New relevant acquisitions financed with Cosan's own resources or by additional debt could negatively impact the company's ratings.

ALL is Latin America's largest independent logistics company and operates rail-based integrated services for a diversified client base in Brazil and, to a lesser extent, in Argentina. For the LTM ended Sept. 30, 2011, ALL reported, on a consolidated basis, EBITDAR of BRL1.6 billion, total adjusted debt of BRL9.2 billion, cash and equivalents of BRL2.2 billion and a net debt/EBITDA ratio of 4.3x.

Fitch rates Cosan and its subsidiaries as follows:

Cosan

--Local and foreign currency IDRs 'BB+';

--National scale rating 'AA-(bra)'

Cosan Overseas

--Local and foreign currency IDRs 'BB+';

--USD500 million Perpetual notes 'BB+'

CLE

--Local and foreign currency IDRs 'BB+';

--National scale rating 'AA-(bra)'

CCL Finance

--Local and foreign currency IDRs 'BB+';

--Senior unsecured notes due 2014 'BB+'

Cosan Finance

--Local and foreign currency IDRs 'BB+';

--Senior unsecured notes due 2017 'BB+'

The Rating Outlooks for Cosan, Cosan Overseas and CLE are Stable. The ratings for CCL Finance and Cosan Finance are on Rating Watch Positive and this reflects the transfer of unconditional payment guarantees of these notes to Raizen Combustiveis for the former and to Raizen Energia, Raizen Combustiveis and Raizen Energia Participacoes for the latter. In Fitch's opinion, CCL Finance and Cosan Finance's bondholders should benefit from a likely lower underlying credit risk linked to the new guarantors, which are closer to the operating assets and to Raizen's cash flow.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research:

--'Corporate Rating Methodology' (Aug. 12, 2011);

--'National Ratings Criteria' (Jan. 19, 2011).

Applicable Criteria and Related Research:

Corporate Rating Methodology

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=647229

National Ratings Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=595885

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