Fibria May Get Offers for Paper Business This Year
Fibria Celulose SA, the world’s largest pulp maker, may receive offers for its paper business this year as it seeks to regain investment-grade ratings, Chief Executive Officer Carlos Aguiar said.
“If we receive a good proposal, we would consider,” offers to sell the unit, Aguiar, the former CEO of pulp maker Aracruz Celulose SA, bought by Votorantim Celulose & Papel SA to form Fibria last year, said yesterday in an interview in Sao Paulo. “The core business of Fibria is pulp.”
The sale of the paper business, which accounted for 1.2 billion reais ($670 million), or 20 percent, of the company’s revenue last year, would help raise money needed to rid the company of its junk bond ratings. Suzano Papel e Celulose SA owns 50 percent of one of Fibria’s two paper units and has the right of first refusal to buy out its venture partner’s stake.
Votorantim bailed out Aracruz after Brazil’s real plunged 23 percent in 2008 following the collapse of Lehman Brothers Holdings Inc., leaving the company with $2.1 billion of losses from wrong-way currency derivatives. The acquisition left Fibria with 15.7 billion reais of debt in March of last year.
Since then, Fibria pared indebtedness 30 percent to 10.9 billion reais at the end of the first quarter and finished paying off $3 billion related to the currency losses last month. It now plans to use cash to pay 2.4 billion reais owed to former Aracruz shareholders through July 2011, Investor Relations Manager Andre Goncalves said in the same interview.
Reducing Debt
The company has sought to reduce net debt relative to earnings before interest, taxes, depreciation, and amortization, or Ebitda, as it seeks to regain its investment-grade status as early as 2012, Goncalves said. It aims to cut the ratio to 4 in two years, reducing it from 5.6 at the end of March, he said.
Fibria rose 86 centavos, or 2.9 percent, to 30.40 reais in Sao Paulo trading at 11:01 a.m. New York time, after earlier gaining as much as 3.1 percent, the most in a week. Before today, the stock dropped about 24 percent this year, compared with a 5.9 percent decline for the Bovespa stock index.
Standard & Poor’s cut the company’s rating three levels to BB, two below investment grade, last year because of the acquisition of Aracruz. S&P said April 22 it may increase the rating in coming quarters after China-led demand allowed Fibria to boost prices for a sixth straight month in May.
“The positive market environment reflects secular trends– including strong demand from China for hardwood pulp,” S&P said after raising the company’s rating outlook to “positive” from “stable.” “Fibria will likely accelerate the improvement of its financial profile, which could lead to an upward rating action in the next few quarters.”
Billionaire Controller
A company controlled by billionaire Joseph Safra and a group led by the Lorentzen family that founded Aracruz each owned 27 percent of the pulp maker before Votorantim, which also held 27 percent, agreed to buy out the partners. Fibria will pay 1 billion reais this month and 1.4 billion reais more next year to the families, Goncalves said.
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