Fitch Downgrades Libra Terminal Rio to 'C'/'C(bra)' Following Restructuring Proposal Announcement

SAO PAULO--()--Fitch Ratings has downgraded Libra Terminal Rio S.A.'s (Libra Rio) Long-Term Issuer Default Rating (IDR) to 'C' from 'CCC' and National Long-Term Rating to 'C(bra)' from 'CCC(bra)' following the company's announcement that it is submitting a formal plan to restructure its existing debts. Fitch has also downgraded the rating assigned to the 1a Emissao de debentures in total amount of BRL270 million due 2019 to 'C(bra)' from 'CCC(bra)'.

The downgrade is driven by the imminent default on financial obligations given critical cash flow generation and the expectation that the proposal will include material changes to existing terms with current debt holders, particularly the extension of maturity dates, leading it to be considered a Distressed Debt Exchange (DDE) according to Fitch's applicable criteria. The announcement proposing the restructuring was made on Nov. 30, 2016, with an investor assembly called for Dec. 15, 2016. Libra Rio management's proposal is expected to include a new payment schedule to the debentures and other existing debt, replacement of guarantees, and proposal of new covenants, representations, and/or warranties.

KEY RATING DRIVERS

Libra Rio's rating is driven by the consolidated profile of Libra Holding S.A. (Libra Holding), given the cross default clauses between operating subsidiaries Libra Rio and Libra Terminais Santos S.A. (Libra Santos, not rated), and the guarantees provided by Libra Holding. This supports a view that strong operational and financial linkages exist between the different operating companies of the group. Libra Rio is the key EBITDA generator of the Libra Group. Libra Holding has no financial debt, but it is strongly committed to the OpCos, providing guarantees to debts at Libra Santos and Libra Rio.

Consolidated adjusted net debt to EBITDAR ratio stood at 6.3x in 2015 and is expected to spike to record levels given the severe deterioration in EBITDA, from BRL360 million in 2013 to negative levels in 2016. The Issuer's ability to honor the high interest burden and pay/refinance 2017 maturities of approximately BRL500 million, coupled with capex obligations following early renewal of the leasing agreement for Libra Santos, is severely compromised. As of September 2016, the Issuer held total consolidated cash of BRL204.1 million, down from BRL397.8 million in December 2015.

RATING SENSITIVITIES

If the restructuring plan is adhered to, the Issuer ratings will be downgraded to Restricted Default (RD), upon completion of the DDE, while the Issue Rating assigned to the debentures will be downgraded to 'D(bra)'. Once sufficient information is available, the 'RD' rating will be re-rated to reflect the appropriate IDR for the Issuer's post-exchange capital structure, risk profile, and prospects in accordance with relevant Fitch criteria.

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

Applicable Criteria

Distressed Debt Exchange (pub. 08 Jun 2016)

https://www.fitchratings.com/site/re/882737

Parent and Subsidiary Rating Linkage (pub. 31 Aug 2016)

https://www.fitchratings.com/site/re/886557

Rating Criteria for Infrastructure and Project Finance (pub. 08 Jul 2016)

https://www.fitchratings.com/site/re/882594

Rating Criteria for Ports (pub. 17 Oct 2016)

https://www.fitchratings.com/site/re/889015

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=1016159

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1016159

Endorsement Policy

https://www.fitchratings.com/regulatory

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Contacts

Fitch Ratings
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Bernardo Costa
Senior Director
Fitch Ratings Brasil Ltda.
+55-11-4504-2607
Alameda Santos, 700 - 7 andar - Cerqueira Cesar
Sao Paulo - SP - CEP: 01418-100
or
Secondary Analyst
Gisele Paolino
Director
+55-21-4503-2624
or
Committee Chairperson
Glaucia Calp
Managing Director
+571 484 6778
or
Media Relations:
Elizabeth Fogerty, +1-212-908-0526
elizabeth.fogerty@fitchratings.com

Contacts

Fitch Ratings
Primary Analyst
Bernardo Costa
Senior Director
Fitch Ratings Brasil Ltda.
+55-11-4504-2607
Alameda Santos, 700 - 7 andar - Cerqueira Cesar
Sao Paulo - SP - CEP: 01418-100
or
Secondary Analyst
Gisele Paolino
Director
+55-21-4503-2624
or
Committee Chairperson
Glaucia Calp
Managing Director
+571 484 6778
or
Media Relations:
Elizabeth Fogerty, +1-212-908-0526
elizabeth.fogerty@fitchratings.com