Friday, 19 December 2008

Rating Agencies Are Keeping Us Busy These Days: Now It's the Turn for Votorantim

Moody's today changed the Baa3 ratings outlook (investment-grade) for Brazil's Votorantim to stable from positive. The move scraps the chance of an upgrade that should have taken place by the first quarter of 2009. This deals a blow to the group, which in October disclosed 2.1 billion reais in losses stemming from wrong bets on derivatives contracts linked to the direction of the exchange rate. I appreciate one of my sources' heads-up on this one (I almost missed it because I am on my way to the airport!)

In the note, Moody's says the action reflects declining prices for the commodities produced by the group (cellulose, metals, minerals, etc.) and the impact of the credit crisis on the group's funding strategy. The expected declines in earnings and cash flows should be offset by the recent drop of the real against the dollar (the devaluation should mitigate Votorantim's declining sales in its exports markets.) Moody's mentions a positive aspect of the cement business -- saying local demand for cement in Brazil should be propped up by the government's push to finance a series of heavy construction projects. We hope the ratings company isn't being too optimistic in that front. 


  1. thanks for this!! when will you be back from your blog-vacation? gitchma

  2. Hi Gitchma ...

    I will be back on Jan. 5 ... promise to write more and better along 2009. Thanks a lot for your comments ...

    Don´t pour water on those creatures and avoid feeding them after midnight. They are sweet but they can become dangerous, mean cratures.

    Happy New Year and thanks a lot for following this blog