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S&P Downgrades Cosan Credit Rating to 'B+' on Weaker Diversification
Summary
S&P Global Ratings has lowered its credit rating for Cosan S.A. to 'B+' from 'BB-', citing a weakened business profile following the debt restructuring of its affiliate, Raízen. The agency maintained a negative outlook, reflecting uncertainty over the company's divestment strategy.
S&P Global Ratings announced on Wednesday it has downgraded the issuer credit rating of Brazilian conglomerate Cosan S.A. to 'B+' from 'BB-'. The rating was also removed from CreditWatch with negative implications, where it had been placed on March 6, 2026. The agency assigned a negative outlook, signaling potential for a further downgrade amid uncertainties about Cosan's future asset sales and their impact on its financial health.
The downgrade is primarily linked to the debt restructuring of Raízen S.A., a major energy joint venture. Raízen's restructuring plan will significantly dilute Cosan's investment, weakening its overall business diversification. Cosan is not participating in Raízen's new capital increase and, as of March 2026, had already reduced the carrying amount of its investment in the affiliate to zero on its financial statements due to impairment charges.
S&P projects that Cosan's interest coverage ratio will likely remain below 1.0x for the next two years unless the company undertakes further asset sales. The rating agency estimates Cosan's cash inflows from subsidiaries will be insufficient to cover its financial expenses, projecting cash upstream of 1.4 billion reais against expenses of 2.9 billion reais in 2026.
AdDespite the downgrade, S&P forecasts Cosan's consolidated net leverage to improve, falling to a range of 2.5x-3.0x in 2026 and 2.0x-2.5x in 2027, down from 3.4x in the 12 months ended March 31, 2026. Cosan's management has stated a goal of achieving zero net debt and has indicated it is exploring strategic alternatives, including potential divestments involving subsidiaries like Rumo.
The negative outlook could be revised to stable if Cosan successfully executes divestments that simplify its capital structure, reduce its interest burden, and consistently maintain a debt service coverage ratio above 1.0x. Conversely, another downgrade could occur if asset sales further reduce diversification without materially improving the holding company's finances, or if leverage increases due to weaker performance.