Cosan's BRL Senior Notes outlook stable

Global rating agency Fitch rates Cosan Luxembourg S.A.'s senior unsecured notes issue, in the amount of BRL500 million and coupon of 9.5%, due 2018, 'BB+'. The notes will be unconditionally and irrevocably guaranteed by Cosan S.A. Industria e Comercio (Cosan) and will rank equally with all Cosan's unsecured indebtedness. Net proceeds will be used to prepay a portion of Cosan's BRL3.3 billion debentures issued to finance the acquisition of Comgas.

Cosan's ratings reflect the increasing contribution of a more diversified asset portfolio and more predictable cash flow businesses on a consolidated basis, which partially soften the impacts of the volatility of the sugar and ethanol industry. Cosan's ratings fundamental has been positively enhanced by the creation of a joint-venture with Shell Brazil Holdings BV (Raizen), under conservative financial terms, and it is strongly linked to Raizen's credit pro- file, given the relevance of this joint venture compared to Cosan's consolidated performance (55% of 2013 EBITDA, as per Fitch estimates). Cosan's pro forma credit ratios, considering the last 12 months (LTM) EBITDA of Comgas, its robust liquidity position and its manageable debt profile further support the ratings.

Cosan's pro forma net debt/EBITDA considering Comgas' LTM EBITDA is 3.2x, despite lower than historical EBITDA margins of the acquired company in that period, due to some cost mismatches to be passed through its tariffs. Considering a normalized EBITDA for Comgas, Cosan's pro forma net leverage on a consolidated basis would be around 3.1x. This ratio compares favorably with the 3.3x pro forma net leverage ratio as of March, 2012. Fitch's debt calculations also consider rescheduled taxes net of credits to be received from ExxonMobil, pension fund obligations (mostly migrated from Comgas) and intercompany loans.