Fitch Rates Votorantim Cimentos Bond Reopening 'BBB-'

CHICAGO--(BUSINESS WIRE)--

Votorantim Cimentos S.A's (VCSA) has announced the reopening of its bond due 2041. The reopening will carry the same rating as the original deal of 'BBB-'. These bonds have been guaranteed by Votorantim Participacoes S.A. (VPAR) and Votorantim Industrial S.A. (VID). The VPAR guarantee can be released under certain conditions. The reopening is an additional offering of the US$750 million, 7.25% bond due April 5, 2041. Proceeds from this transaction will be used for general corporate purposes, including the repayment of existing debt.

Fitch currently rates VPAR, VID and VCSA as follows:

VPAR:

--Foreign currency Issuer Default Rating (IDR) at 'BBB-';

--Local currency IDR at 'BBB-';

--National scale rating at 'AA+ (bra)'.

VID

--Foreign currency IDR at 'BBB-'.

VCSA:

--Foreign currency IDR at 'BBB-';

--Senior unsecured note due 2017 at 'BBB-';

--Senior unsecured bond due 2041 at 'BBB-'.

The Rating Outlook for VPAR, VID and VCSA is Positive

The ratings of VCSA, VID and VPAR have been directly linked through Fitch's parent and subsidiary methodology.

The ratings of VPAR continue to reflect the strong, long-term underlying fundamentals of the company's industrial businesses, which are organized under its industrial subsidiary, VID. The Positive Rating Outlook for VPAR and its subsidiaries reflects an expectation that the company will lower leverage by the end of 2012. Key drivers of debt reduction should be asset sales and strong cash flow from the company's Brazilian cement business.

Through VID subsidiaries, VPAR is the leading cement company in Brazil with a market share of approximately 40%. The outlook for cement demand in Brazil is favorable in the near- and medium-term due to strong housing demand and major investments in infrastructure. Within the next three years, the company is expanding its Brazilian production capacity by approximately 10 million tons per year. This division, which accounts for about 40% of VID's EBITDA, also includes multiple investments in cement throughout Latin America and North America, as well as a 21.21% stake in Cimpor, one of the world's largest cement companies.

In addition to cement, VID is well positioned in zinc, nickel and aluminum due to its ownership of the rights to high-quality ore, and its integrated operations, which include significant investments in energy. VID's metal's operations are enhanced by its 50.02% stake in Milpo, a leading mining company that is based in Peru and has significant reserves. The metals division also accounts for about 40% of VID's EBITDA.

In addition to the aforementioned divisions, VID has a significant presence in market pulp due to its ownership of 29.3% of Fibria Celulose S.A., the world's largest producer of market pulp. VID also has a presence in steel through its operations in Brazil, Argentina and Colombia. The company's presence in steel will diminish in the future. The company recently sold its 13% voting stake in Usiminas, a leading flat steel producer in Brazil, for BRL2.4 billion.

VPAR has a financial subsidiary, Votorantim Financas (VF), that owns 50% of Banco Votorantim, which is rated 'BBB-' by Fitch. This rating is based upon the support Fitch believes Banco Votorantim would receive from Banco do Brasil (BdB) in a time of financial stress. As a result, analytically, Fitch strips away the financial metrics of VF from VPAR's consolidated figures and focuses on the standalone credit metrics of VID.

For the 12 months ended Sept. 30, 2011, VID generated BRL5.6 billion of EBITDA. VID had BRL5.9 billion of cash and marketable securities and BRL23 billion of total debt. These figures result in a total debt-to-EBITDA ratio of 4.1 times (x) and a net debt-to-EBITDA ratio of 3.1x. These ratios are expected to continue to improve during the fourth quarter of 2011 and 2012 as new cement capacity comes on-line. Pro forma, as though the sale of VID's stake in Usiminas took place in the third quarter, the net leverage ratio would have been 2.6x. VID's liquidity is manageable, as the company has only BRL2 billion of short-term debt and the average life of its debt is more than seven years. The company also has a BRL3.1 billion revolving credit facility.

Factors leading to the consideration of a Positive Outlook or upgrade are lower absolute and relative debt levels or a stronger and less correlated product portfolio. Factors that could lead to consideration of a Negative Outlook or downgrade include a change of management's strategy with regard to returning VID's net debt-to-EBITDA ratio to approximately 2.0x. A prolonged downturn in demand and prices for commodities or a sharp downturn in the Brazilian economy could also result in a negative rating action, as would a weakening of the company's position in the Brazilian cement industry.

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. 12, 2011);

--'Parent and Subsidiary Rating Linkage' (Aug. 12, 2011);

--'National Ratings Criteria' (Jan. 19, 2011).

Applicable Criteria and Related Research:

Corporate Rating Methodology

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

Parent and Subsidiary Rating Linkage

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=647210

National Ratings Criteria

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

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