Fitch Affirms USJ's IDRs at 'C'

SAO PAULO--(BUSINESS WIRE)-- Fitch Ratings has affirmed the Foreign and Local Currency Long-Term Issuer Default Ratings (IDRs) of U.S.J. - Acucar e Alcool S.A. (USJ) at 'C' and the National Scale Rating at 'C(bra)'. Fitch has also affirmed the company's USD275 million senior unsecured notes due 2019 at 'C/RR4'. A complete list of the rating actions follows at the end of this release.

KEY RATING DRIVERS

The ratings are consistent with USJ's failure on paying the coupon related to the USD275 million senior unsecured notes. As of May 9, 2016, the company entered in a 30-day cure period.

USJ's ratings had already been downgraded to 'C'/'C(bra)' on March 17, 2016, after the company's announcement of a private exchange offer for any and all of its outstanding 9.875% senior unsecured notes due 2019 for newly issued secured notes. The exchange offer conditions have been changed since then and the latest deadline for acceptance by the bondholders is on May 13, 2016. According to Fitch's methodology, this exchange proposal is viewed as a distressed debt exchange (DDE).

New terms and conditions of the exchange notes state the company will have the option to defer coupon payments in 2016 and 2017 and pay accrued interest at maturity, which has been extended to 2021 from 2019. In case USJ defers coupon payments in 2016 and 2017, the coupon rate will increase to 12% for these two years, and return to the original 9.875% in the following years. More collateral has been added to the new proposal compared to the original one and the notes will be secured by a fiduciary lien on USJ's Araras mill, lien on land and pledge of sugar cane. The proposed haircut was reduced to 25% from 35%-40% under the original offer.

The conclusion of the debt exchange offer and consent solicitation is conditioned upon the valid tender of at least 90% of the aggregate principal amount of the outstanding existing notes.

RATING SENSITIVITIES

USJ's IDRs and National Scale ratings will be downgraded to Restrict Default ('RD') and 'RD(bra)', respectively, once the exchange offer is approved or if the company defaults on its scheduled debt amortization/interest payments. Shortly after the conclusion of the exchange offer, ratings are likely to be upgraded to reflect company's new capital structure and liquidity.

FULL LIST OF RATING ACTIONS

Fitch has affirmed the following ratings:

U.S.J. - Acucar e Alcool S.A

--Foreign and Local Currency Long-Term IDRs at 'C';

--Long-Term National Scale rating at 'C(bra)';

--USD275 million senior unsecured notes due 2019 at 'C/RR4'.

Additional information is available on 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=1004413

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1004413

Endorsement Policy

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

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

View source version on businesswire.com: http://www.businesswire.com/news/home/20160512006451/en/

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:
Elizabeth Fogerty, +1 212-908-0526
[email protected]

Source: Fitch Ratings

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