Fitch may cut Aracruz, affirms Votorantim

Fitch Ratings said it placed Aracruz Celulose SA's BBB local- and foreign-currency issuer default ratings on Rating Watch negative.

The agency affirmed BBB local- and foreign-currency issuer default ratings of Votorantim Participacoes SA and Votorantim Celulose e Papel.

The outlook is stable.

Fitch said the actions follow the announcement by Votorantim Celulose that its controlling shareholder Votorantim Industrial SA reached an agreement with Arainvest to establish a holding company to consolidate their joint investments in Votorantim Celulose and Aracruz.

The watch reflects a likely downgrade of ratings to BBB- at the conclusion of a merger, according to the agency.

For the past five years, Aracruz had an average net debt-to-EBITDA ratio of 1.6 times, which is significantly lower than the 2.5x ratio the new company is expected to maintain, Fitch noted.

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