Fitch Downgrades Tonon Bioenergia S.A's Ratings to 'D'

SAO PAULO--()--Fitch Ratings has downgraded Tonon Bioenergia S.A's (Tonon) foreign and local currency Issuer Default Ratings (IDRs) to 'D' from CC'. At the same time, Fitch has downgraded to 'C/RR4' from 'CC/RR4' the rating to the USD289 million unsecured notes due 2020 (effective July 29, 2015), and the rating on the remaining USD11 million senior unsecured notes due 2020 and USD230 million senior secured notes due 2024. All related debts have been issued by Tonon's fully-owned subsidiary Tonon Luxembourg S.A. A full list of ratings actions follows at the end of this release.

KEY RATING DRIVERS

These rating actions follow the announcement by Tonon that it has filed for bankruptcy protection in Brazil. This announcement will result in payment default on some or all of Tonon's debt and result in a debt renegotiation.

KEY ASSUMPTIONS

Fitch believes the Brazilian court will accept Tonon's filings.

RATING SENSITIVITIES

An upgrade is unlikely in the near term given the group's bankruptcy protection filing.

LIQUIDITY

Tonon had BRL110 million of cash and cash equivalents as of Sept. 30 2015. This compares with BRL2.8 billion of total debt, of which approximately BRL285 million was short-term. Its short-term assets also included BRL77 million of inventories, BRL63 million of accounts receivables, and BRL31 million of advances to suppliers. The company's long-term assets include BRL808 million of sugarcane plantations and BRL556 million of PPE, which primarily consists of three mills with sugarcane crushing capacity of 9.4 million tons per year. The company does not own relevant land assets.

FULL LIST OF RATING ACTIONS

Fitch has downgraded the following:

Tonon Bioenergia S.A.

--Foreign currency IDR to 'D' from 'CC';

--Local currency IDR to 'D' from 'CC'.

Tonon Luxembourg S.A.

--USD289 million senior unsecured notes, due 2020, to 'C/RR4' from 'CC/RR4';

--USD11 million senior unsecured notes, due 2020, to 'C/RR4' from 'CC/RR4'.

--USD230 million senior secured notes, due 2024, to 'C/RR4' from 'CC/RR4'.

Additional information is available at www.fitchratings.com

Applicable Criteria

Corporate Rating Methodology - Including Short-Term Ratings and Parent and Subsidiary Linkage (pub. 17 Aug 2015)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=869362

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form
https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=996520

Solicitation Status
https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=996520

Endorsement Policy
https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31

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Contacts

Fitch Ratings
Primary Analyst
Claudio Miori
Associate Director
+55-11-4504-2207
Fitch Ratings Brasil Ltda
Alameda Santos, 700 - 7 andar, Sao Paulo, sp CEP 01418-100
or
Secondary Analyst
Alexandre Garcia
Associate Director
+55-11-4504-2616
or
Committee Chairperson
Joe Bormann, CFA
Managing Director
+1-312-368-3349
or
Media Relations
Alyssa Castelli, +1 212-908-0540
alyssa.castelli@fitchratings.com

Contacts

Fitch Ratings
Primary Analyst
Claudio Miori
Associate Director
+55-11-4504-2207
Fitch Ratings Brasil Ltda
Alameda Santos, 700 - 7 andar, Sao Paulo, sp CEP 01418-100
or
Secondary Analyst
Alexandre Garcia
Associate Director
+55-11-4504-2616
or
Committee Chairperson
Joe Bormann, CFA
Managing Director
+1-312-368-3349
or
Media Relations
Alyssa Castelli, +1 212-908-0540
alyssa.castelli@fitchratings.com