Moody’s Mulls Cosan Downgrade

Moody’s has placed the Ba2 foreign currency senior unsecured rating of Cosan on review for possible downgrade, affecting approximately $886m in debt. The action was prompted by the announcement that Cosan has signed a share purchase agreement with ExxonMobil to purchase its fuel distribution and lubes assets in Brazil at a price of $826m, in addition to the assumption of $163m in net debt and net related-party receivables of $35m, the agency says. “While the acquisition of such assets should benefit Cosan’s credit profile by diversifying its operating activities providing it with a more integrated platform and reducing the volatility of its cash flows, this transaction will lower Cosan’s overall operating margins and depending on how the transaction is financed, total leverage as measured by debt to Ebitda could increase,” Moody’s says.