Fitch Assigns IDR of 'BBB' to Raizen Energia and Raizen Combustiveis

  Fitch Assigns IDR of 'BBB' to Raizen Energia and Raizen Combustiveis

Business Wire

CHICAGO & BUENOS AIRES, Argentina -- July 05, 2012

Fitch Ratings has assigned a 'BBB' Foreign and Local Currency Issuer Default
Ratings (IDR) and an 'AAA(bra)' National Scale Rating to Raizen Energia
Participacoes S.A. (Raizen Energia) and Raizen Combustiveis S.A. (Raizen
Combustiveis).

Fitch has also taken the following rating actions on Raizen Energia's and
Raizen Combustiveis' related companies:

CCL Finance Limited (CCL Finance):

-- FC IDR upgraded to 'BBB' from 'BB+';

-- Senior Unsecured Notes due in 2014 upgraded to 'BBB' from 'BB+'.

Cosan Finance Limited (Cosan Finance):

-- FC IDR upgraded to 'BBB' from 'BB+';

-- Senior Unsecured Notes due in 2017 upgraded to 'BBB' from 'BB+'.

The existing corporate ratings have been removed from Rating Watch Positive.
The Outlook of all Ratings is Stable.

Fitch analyses Raizen Energia and Raizen Combustiveis as a combined entity
(Raizen), given the mutual financial support and cross guarantees provided
within the joint venture composed of these operational companies.

Raizen's 'BBB' rating incorporates Fitch's expectation that the company is
likely to receive relevant financial support from its shareholders, Shell in
particular. (Shell Brazil Holdings BV, is a subsidiary of Royal Dutch Shell
Plc, with a Fitch IDR of 'AA'). Fitch also expects that Raizen will continue
to maintain a conservative capital structure in the coming years, keeping its
disciplined financial strategy and low leverage while adequately managing its
businesses' growth.

The ratings also reflect the strength of Raizen's business profile on a
combined basis, with a diversified asset base, a sizeable scale in most of its
markets, and a relevant contribution of its businesses with more predictable
cash flow. The fuel distribution and energy cogeneration activities together
currently represent approximately 38% of Raizen's EBITDA and reduce its cash
flow volatility associated with the sugar and ethanol industry. Raizen's
strong market position is also factored into the ratings. The company is the
leading global sugar and ethanol producer, with a 10.7% market share in Brazil
in terms of effective sugar cane crushing in a very fragmented market. Raizen
is also the top 3 fuel distributor in Brazil and the largest biomass energy
generator in the country.

Like all players in this industry, Raizen's sugar and ethanol businesses are
volatile and exposed to the climatic conditions and challenges related to the
ethanol industry's dynamics in Brazil. Currently, ethanol prices are strongly
correlated to the regulated gasoline prices in the country and the
governmental policies related to this issue. These business risks are
partially mitigated by its solid capital structure.

The upgrade of CCL Finance and Cosan Finance's ratings reflect the transfer of
unconditional payment guarantees of the notes issued by these companies to
Raizen Combustiveis for the former and Raizen Energia, Raizen Combustiveis and
Raizen Energia Participacoes S.A. (REP) for the latter. The guarantees were
previously granted by Cosan Combustiveis e Lubrificantes (currently Cosan
Lubrificantes e Especialidades) and Cosan Industria e Comercio S.A.,
respectively (Cosan rated 'BB+'/'AA-(bra)').

Strategic Importance of Raizen to its Shareholders Reinforces Financial
Support

Raizen represents around 10% of Shell's capital employed in its global
downstream business and it is also one of Shell's main vehicles for growth in
the renewable energy sector. Although Raizen operates as an independent
entity, its strategic importance for Shell, which owns 50% of the joint
venture (JV), supports its ratings. Fitch expects that as an important
shareholder Shell is likely to provide financial support if it is needed and
will promote financial discipline, similar to other Shell investments
worldwide. Fitch also considers that Shell has a ten-year call option on the
venture. Under the JV agreements, between the 10th and the 15th anniversaries
of the closing of the JV, Shell will be granted the right to acquire the
remaining 50% of the JV from Cosan for a fair market value to be determined
based on a customary appraisal and dispute resolution process.

Raizen also benefits from the business expertise of Cosan, which jointly
control the company. The company is a major cash flow contributor for Cosan,
representing, on a combined basis, around 55% of Cosan's consolidated EBITDA
for 2013, as per Fitch estimates.

Conservative Financial Profile

As per Fitch estimates, considering the mid-cycle prices of sugar and ethanol,
Raizen is expected to maintain a net leverage ratio (net debt/EBITDA) below
2.0x in the coming years. These positive estimates result from its currently
healthy capital structure. Fitch also considers the relevant EBITDA
contribution of Raizen's more stable cash flow businesses, namely the fuel
distribution activities, and to a lesser extent the energy cogeneration
business.

According to the agency's financial projections, the contribution of Raizen's
more predictable businesses, currently at around 38% of combined EBITDA,
should range between 35% and 48% in the next three years, depending on the
market environment for sugar and ethanol and the development of the JV's
planned investments.

Fitch expects Raizen's EBITDA to grow in the low single digits in 2013. The
company's free cash flow should continue to be pressured at least in the next
three years due to its high capex program of around BRL11 billion for this
period, which includes substantial investments in crop renovation and
expansion and brownfield projects. Fitch projections incorporate single-digit
sugar and ethanol price reductions compensated for by a higher volume of
production as a result of a better utilization rate in Raizen's facilities.

The company generated BRL3.6 billion of pro forma EBITDA in March 2012
(considering the last 12 months, although Raizen is effectively in place since
June 2011), a 28% increase from BRL2.8 billion in March 2011. The company's
revenues increased by 11% as compared to the same period in the prior year. As
of March 31, 2012, Raizen had BRL1.2 billion of cash and market securities and
BRL6.3 billion of total debt. Raizen's total debt/EBITDA ratio was 1.8x and
the net debt/EBITDA ratio was 1.4x.

Strong Business Profile, with Competitive Advantages related to Assets Base

Raizen's sizeable scale, with 65 million tons of sugar cane crushing capacity,
a vast fuel distribution network and its diversified asset base gives the
company operational flexibility and complementary businesses synergies. Fitch
notes positively the significant cost savings and efficiency gains already
obtained by its downstream business in the first year of operations of the
joint venture, which have resulted in a significant improvement in the EBITDA
margins of this segment to 3.1% on a pro forma basis for the last 12 months
ended March 31, 2012, compared to 2.0% for March 2011. On an ongoing basis,
Fitch believes that Raizen will be able to capture further synergies with the
sugar and ethanol businesses, which should further enhance its cash flow
generation.

Key Rating Drivers

Any evidence of a lack of financial support from its shareholders may pressure
the ratings. Relevant debt-financed acquisitions not contemplated in the
current business model and/or weaker than expected cash flow generation that
results in a higher leverage on a recurring basis could lead to negative
rating actions. A positive rating action could occur in the case of a stronger
than expected financial performance led by the capture of higher cost savings
and synergies, as well as by the maturity of ongoing investments, that result
in positive free cash flows on a recurring basis.

Additional information is available at 'www.fitchratings.com'. The ratings
above were solicited by, or on behalf of, the issuer, and therefore, Fitch has
been compensated for the provision of the ratings.

Applicable Criteria and Related Research:

--'Corporate Rating Methodology' (Aug. 13, 2010);

--'National Ratings - Methodology Update' (Jan. 19, 2011).

Applicable Criteria and Related Research:

National Ratings Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=595885

Corporate Rating Methodology

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=647229

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Contact:

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