Fitch Upgrades Aracruz Ratings To 'BBB'.Business Editors CHICAGO--(BUSINESS WIRE)--Dec. 17, 2001 Fitch has upgraded the senior secured local currency credit rating of Aracruz Celulose Aracruz Celulose S.A. is a major Brazilian manufacturer of pulp. It is headquartered in São Paulo. The company is the world's leading supplier of bleached eucalyptus pulp. S.A. (Aracruz) to 'BBB' from 'BBB-', and the secured export notes of the company that are due in 2002 to 'BBB' from 'BBB-'. In conjunction with these rating actions, Fitch has assigned a 'BBB-' senior unsecured local currency rating to Aracruz and has affirmed its 'BB-' foreign currency rating. The Rating Outlook for the local currency rating is Stable and the Rating Outlook for the foreign currency rating is Negative. The foreign currency rating of Aracruz is constrained con·strain tr.v. con·strained, con·strain·ing, con·strains 1. To compel by physical, moral, or circumstantial force; oblige: felt constrained to object. See Synonyms at force. 2. by Fitch's 'BB-', Rating Outlook Negative, rating of the government of Brazil. The rating upgrades are supported by the substantial improvements in Aracruz's credit profile during the past few years. Since the beginning of 1999, Aracruz has decreased its exposure to counterparty credit risk with the Brazilian government by decreasing its investments in Brazilian securities from approximately $750 million to less than $400 million. During this time period, the company has also used cash flow from operations Cash flow from operations A firm's net cash inflow resulting directly from its regular operations (disregarding extraordinary items such as the sale of fixed assets or transaction costs associated with issuing securities), calculated as the sum of net income plus noncash expenses to reduce debt. As a result, Aracruz's gross debt has decreased from $1.52 billion to approximately $850 million and its net debt has decreased from $674 million to $354 million. Aracruz is currently in the midst Adv. 1. in the midst - the middle or central part or point; "in the midst of the forest"; "could he walk out in the midst of his piece?" midmost of an expansion project that will increase the company's output of bleached eucalyptus eucalyptus (y  'kəlĭp`təs): see myrtle. eucalyptus kraft market pulp (BEKP BEKP Bleached Eucalyptus Kraft Pulp ) from 1.3 million metric tons per year to 2.0 million metric tons. At the time the project is complete - mid-2002 - the company should have approximately $900 million of debt and $200 million of cash and marketable securities Marketable Securities Very liquid securities that can be converted into cash quickly at a reasonable price. Notes: Marketable securities are very liquid as they tend to have maturities less than one year, and the rate at which these securities can be bought or sold has . As one of the lowest cost producers of hardwood pulp in the world, with a cash cost of production of approximately $165 per metric ton, Aracruz should be able to generate $300 million of EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become per year at cyclically low, average BEKP prices of $400 per ton once its expansion is completed. If BEKP prices average $650, as they did in 2000, Aracruz's EBITDA should be $800 million. As a result, during the next five years, the Years, The the seven decades of Eleanor Pargiter’s life. [Br. Lit.: Benét, 1109] See : Time company's EBITDA-to-gross interest expense ratio should range from 3.5 times (x) to 10.0x - depending upon the price of pulp - and its gross debt-to-EBITDA ratio should vary between 3.0x and 1.0x. Due to the company's strong business and financial positions, these ratings are consistent with the 'BBB' rating category. In the future, approximately 50% of the company's debt will be secured. Consequently, the company's unsecured local currency rating was notched down to 'BBB-' to reflect different recovery probabilities between the classes of debt. The rating of Aracruz's secured export notes exceeds Fitch's 'BB-' foreign currency rating of the Brazilian government due to the transaction structure of the notes, which mitigates certain sovereign transfer and convertibility risks. The structural enhancements of the notes include an offshore trust account, a collection account, overcollateralization, a three-month interest-reserve account and periodic performance tests of receivables generation and collection. Aracruz was incorporated in Brazil in 1972. The company is currently the largest producer of hardwood market pulp in the world. Aracruz supports its pulp operations with 165,000 hectares of eucalyptus plantations. |
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