Fitch Downgrades ALL's Ratings.RIO DE JANEIRO Rio de Janeiro, city, Brazil Rio de Janeiro (rē`ō də zhänā`rō, Port. rē`  thĭ zhənĕē`r , Brazil & CHICAGO -- Fitch downgrades the following ratings for America Latina Logistica S.A. (ALL): --Local and foreign currency Issuer Default Ratings (IDR IDR In currencies, this is the abbreviation for the Indonesian Rupiah. Notes: The currency market, also known as the Foreign Exchange market, is the largest financial market in the world, with a daily average volume of over US $1 trillion. ) to 'B+' from 'BB-'; --Long-term national rating to 'BBB+(bra)' from 'A-(bra)'; --Third, fourth and fifth debenture issuances to 'BBB+(bra)' from 'A-(bra)'. The ratings have also been removed from Rating Watch Negative, where they were originally placed on May 10, 2006. The Rating Outlook for the local and foreign currency IDRs and long-term national ratings is Stable. These rating actions are the result of the increased debt to be assumed by ALL in the proposed BRL BRL In currencies, this is the abbreviation for the Brazilian Real. Notes: The currency market, also known as the Foreign Exchange market, is the largest financial market in the world, with a daily average volume of over US $1 trillion. 1.4 billion acquisition of Brasil Ferrovias S.A. (Brasil Ferrovias) and its affiliate Novoeste Brasil S.A. (Novoeste). The acquisition has been approved by Brazil's national surface transportation agency, Agencia Nacional de Transportes Terrestres (ANTT), and is expected to be completed by the end of the month. Payment will be made using ALL's common and preferred shares Preferred shares Preferred shares give investors a fixed dividend from the company's earnings and entitle them to be paid before common shareholders. See: Preferred stock. such that the transaction will result in no new debt issuances at the ALL holding company and operating subsidiary levels. However, the acquisition of higher leveraged Brasil Ferrovias and Novoeste will significantly increase consolidated leverage and should negatively affect the overall credit quality of ALL. The transaction is expected to add about BRL3.9 billion of debt and lease obligations to ALL's consolidated debt level of about BRL1.7 billion as of Dec. 31, 2005. The BRL3.9 billion includes BRL3.0 billion of debt at the acquired companies and its operating subsidiaries and about BRL 900 million of new debt to be used for restructuring costs and to improve the acquired railways' operating efficiency over the medium-term. ALL's liquidity is supported by about BRL1 billion of cash as of March 31, 2006. In 2005, ALL's EBITDAR Earnings Before Interest, Taxes, Depreciation, Amortization, and Restructuring Costs - EBITDAR An indicator of a company's financial performance calculated as: = Revenue - Expenses (excluding tax, interest, depreciation, amortization, and restructuring costs) was BRL457 million while Brasil Ferrovias' EBITDAR totaled BRL226 million. As a result of the acquisition, ALL's consolidated adjusted total debt/operating EBITDAR ratio of 3.8 times (x) at December 2005 is expected to surpass 6.0x in 2006, which is weak for the rating category. Fitch's 'B+' IDR rating reflects an expectation that ALL's consolidated operating earnings Operating Earnings Profits after subtracting expenses such as marketing, cost of goods sold, administration and general operating costs from revenue. Notes: Tax and interest expenses are not subtracted - operating earnings are synonymous with EBIT (earnings before will increase as a result of investing approximately BRL650 million over the next three years in Brasil Ferrovias' rolling stock rolling stock Any of various readily movable transportation equipment such as automobiles, locomotives, railroad cars, and trucks. Rolling stock generally makes good collateral for loans because the equipment is standardized and easily transportable among and implementing an aggressive cost cutting program at the company, in addition to capturing other cost saving synergies. ALL's ratings incorporate Fitch's expectation that the company will increase its combined EBITDAR generation over the next 24 to 36 months from about BRL700 million to more than BRL1.0 billion and the ratio of total debt to operating EBITDAR will decrease to below 5.0x from about 6.8x currently on a pro forma basis. Positively, the acquisition of Brasil Ferrovias and Novoeste holds the potential to enhance ALL's market position over the medium- to long-term. The acquired railroads also transport agricultural products in the Central Western and South Eastern regions of Brazil Brazil is currently divided in five regions, by the Instituto Brasileiro de Geografia e Estatistica (IBGE). These divisions are composed by states with similar cultural, economical, historical and social aspects, and although through the scientific point of view information given by this . In addition to the ports of Rio Grande, Sao Francisco do Sul and Paranagua that ALL already serves, the operations of Ferrovias Bandeirantes S.A. (Ferroban), a subsidiary of Brasil Ferrovias, will provide access to the Port of Santos The Port of Santos is located in the city of Santos, Brazil. As of 2006, it is the busiest container port in Latin America. [1] , Brazil's largest port for exports. ALL is a holding company that directly controls ALL Brasil and ALL Intermodal, based in Brazil, and indirectly controls ALL -- America Latina Logistica Central S.A. (ALL Central) and ALL -- America Latina Logistica Mesopotamica S.A. (ALL Meso), in Argentina. ALL's network of approximately 16,400 kilometers of railway lines is used to transport mainly soybeans and other agricultural and industrial products in the south of Brazil, in the State of Sao Paulo and in the central and northeastern regions of Argentina The provinces of Argentina are often grouped into six geographical regions. From North to South and West to East, these are:
Brasil Ferrovias is a holding company that owns the Ferrovias Norte Brasil S.A. (Ferronorte) and Ferroban railroads. Novoeste is an affiliated holding company that owns the Ferrovia Novoeste S.A. (Ferrovia Novoeste) railway. Ferronorte operates a network of 506 kilometers that connects the cities of Alto Araguaia (Mato Grosso) and Santa Fe do Sul (Sao Paulo), providing access to Brazil's principal agricultural region in the state of Mato Grosso. With 1,961 kilometers of rail lines, Ferroban connects the Port of Santos (Sao Paulo) to the cities of Santa Fe do Sul, Panorama and Colombia all in the state of Sao Paulo and provides transportation within the states of Mato Grosso, Mato Grosso do Sul Mato Grosso do Sul (pron. IPA: ['ma.tu 'gɾo.su du suw] [1]) is one of the states of Brazil. Neighbouring states are (from north clockwise) Mato Grosso, Goiás, Minas Gerais, São Paulo and Paraná. , and Sao Paulo. Ferrovia Novoeste operates in the states of Mato Grosso do Sul and Sao Paulo with 1,621 kilometers of railway lines. Fitch's rating definitions and the terms of use Terms of Use are rules set up by the owner of an intellectual property or service to govern how they may be legally used. In many cases, terms of service are used as a contractual agreement between a company and users of a service they provide. of such ratings are available on the agency's public site, 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 Policies and Procedures are a set of documents that describe an organization's policies for operation and the procedures necessary to fulfill the policies. They are often initiated because of some external requirement, such as environmental compliance or other governmental are also available from the 'Code of Conduct' section of this site. |
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