By Brazil Stock Guide – S&P Global Ratings downgraded Cosan SA (CSAN3) deeper into junk, citing a weaker business profile after the debt restructuring of Raízen SA (RAIZ4) and persistent pressure on the holding company’s interest coverage.
The ratings firm lowered Cosan’s issuer credit rating to B+ from BB- and assigned a negative outlook, according to a report dated Wednesday (July 8). S&P also cut the rating on perpetual notes issued by Cosan Overseas Ltd. to B+ and removed the ratings from CreditWatch negative, where they had been placed on March 6.
S&P said the risk of direct contagion from Raízen’s restructuring has eased and that it does not expect Cosan to provide cash support or assume significant liabilities tied to the process. Still, the agency said the proposed out-of-court restructuring will significantly dilute Cosan’s investment in Raízen, reducing its economic interest and influence over a company that had historically been a major source of dividends.
Cosan stopped recognizing Raízen’s effects in its financial statements as of March 2026 after impairment charges reduced the carrying value of the investment to zero, S&P said. That loss, the agency added, “fundamentally altered” the group’s cash-flow profile and worsened pressure on interest coverage ratios.
Raízen said in June that it had secured support from more than 80% of creditors for a R$65 billion debt restructuring plan. The proposal includes a R$3.5 billion capital injection from Shell Plc (SHEL), an additional R$500 million option from the Ometto family holding company and the conversion of 45% of the debt into equity.
Cosan will not take part in the expected capital increase, limiting near-term cash outflows. But S&P said funding and refinancing capacity at the holding level remains highly uncertain, noting that Cosan has not yet tested the market for new debt issuance after the Raízen restructuring.
The agency said Cosan’s financial structure remains complex and costly despite recent asset sales and debt reduction. Without further divestments, S&P expects the holding company’s interest coverage ratio — calculated as net dividends received plus interest income over financial cash expenses — to remain below 1.0 times in 2026 and 2027.
Cosan has carried out sizable liability management since December 2025, including about R$9 billion in debt amortization supported by a R$10 billion equity follow-on and the initial public offering of Compass, which raised R$2.3 billion. Even so, S&P said financial expenses at the holding level should remain elevated, at about R$2.9 billion in 2026 and R$1.7 billion in 2027.
The agency said dividends from Rumo SA (RAIL3), Compass, Moove and Radar are not expected to fully cover financial expenses at the holding company. S&P estimates cash upstream net of preferred shares of R$1.4 billion in 2026, including R$586 million related to a sale at Radar, and R$1.1 billion in 2027.
Cosan’s management has said it aims to reach zero net debt and has signaled willingness to explore alternatives involving key subsidiaries, including Rumo. S&P said additional divestments could improve the holding company’s capital structure, but warned that asset sales may further weaken business diversification and reduce long-term dividend generation.
On a consolidated basis, S&P expects Cosan’s net leverage to decline to 2.5 times to 3.0 times in 2026 and 2.0 times to 2.5 times in 2027, from 3.4 times in the 12 months ended March 31 and 4.1 times in 2024. The agency projects EBITDA of R$8.1 billion for Rumo in 2026, R$6.1 billion for Compass, R$1.9 billion for Moove and more than R$1 billion for Radar.
Liquidity remains adequate, according to S&P. The agency forecasts Cosan’s consolidated sources of cash will exceed uses by close to 2.0 times over the next 12 months and remain positive even if projected EBITDA declines 15%. Cosan had about R$7.7 billion in cash at the holding level as of March 2026, while consolidated cash and equivalents stood at R$17.5 billion.
The negative outlook reflects uncertainty over Cosan’s divestment strategy and its impact on the group’s business profile, dividend inflows and debt-service coverage. S&P said it could downgrade the company again if asset sales reduce diversification without materially improving the capital structure, if interest coverage stays below 1.0 times or if liquidity weakens amid continued cash consumption.
The outlook could be revised to stable if future divestments improve and simplify Cosan’s capital structure, lower interest expenses and lift debt-service coverage consistently above 1.0 times, while keeping leverage in line with S&P’s base case.
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