By Alberto Alerigi
SAO PAULO Nov 18 Brazil's Fibria Celulose SA
, the world's largest producer of eucalyptus pulp,
agreed to sell about $600 million of land in a bid to win back
its investment-grade debt rating.
Shares of Fibria rallied to a three-year high on Monday as
executives forecast a return to investment grade for its foreign
debts by June 2014 - the capstone in a two-year push to cut a
hefty debt load.
Fibria is one of many Brazilian companies selling assets to
pay down debts as rising interest rates, disappointing growth
and a weaker currency put businesses on the defensive.
The pulp producer signed a deal to sell 210,000 hectares
(520,000 acres) of land to Parkia Participações for 1.4 billion
reais ($600 million), according to a securities filing. Fibria
could receive another 250 million reais over the next 21 years
if the value of the land continues to appreciate.
Fibria's stock jumped over 5 percent in Sao Paulo trading,
touching its highest levels since November 2010 before paring
gains to 3 percent.
Fibria plans to continue operating on the land, stretching
across four states from Brazil's center-west to its northeast
regions, under a 24-year contract yet to be signed with Parkia.
The move echoes deals struck by Brazilian airlines and phone
companies in recent months to sell and lease back jets and cell
towers, underscoring how moves to quickly pay down debts may
pinch companies' cash flow in the long run.
Fibria could strike more deals like the arrangement with
Parkia, which involved about a third of its land holdings, Chief
Executive Marcelo Castelli told journalists on Monday.
"There could be a second tranche, but not at this moment,"
Castelli said on a conference call. "Not in the short term."
Chief Financial Officer Guilherme Cavalcanti said the
company expected Wall Street rating agencies to upgrade Fibria's
debts to investment grade by the middle of next year, pushing
back an earlier forecast of getting that upgrade by the start of
In March, Standard & Poor's raised the rating on Fibria's
dollar-denominated bonds - which account for nearly 95 percent
of gross debt - from BB to BB+, putting the company just one
notch below investment grade with a stable outlook.
Fitch Ratings, which also rates Fibria's foreign debts BB+,
raised its outlook for the rating to "positive" in February.
Moody's, which rates Fibria's dollar debt just below investment
grade at Ba1, raised its outlook to "positive" in September.
Fibria cut its net debt, or total debt minus cash, to 8.24
billion reais in September, equal to 3 times its annual
operating profit, measured by earnings before interest, taxes,
depreciation and amortization. Net debt could fall to 2.5 times
operating profit by the end of the year, Cavalcanti said.
Fibria has been struggling since the end of 2011 to cut its
debt, which battered results as a volatile exchange rate drove
up foreign debt-servicing costs.
The company's quarterly profit missed estimates last month
as it incurred financial expenses by buying back bonds.