Moody's Downgrades Brazil's Gafisa Due to High Debt
Now - DJNF
By Rogerio Jelmayer
SAO PAULO--Moody's downgraded the credit ratings of Brazilian property firm Gafisa S.A. (GFSA3.BR, GFA) due to company's high debt level.
Moody's cut Gafisa's rating to B1 from Ba3 and maintained its negative outlook for the company.
"The downgrade in Gafisa's ratings reflects the company's high leverage and weak interest coverage ratio when compared to its rated local and global peers," said the rating agency.
Gafisa has been restructuring subsidiaries including Tenda, which the company bought at the end of 2008 to boost its presence in the low-end housing market. The acquisition has added to Gafisa's operating costs, analysts said.
In June, as part of company's strategy to improve its financial performance, Gafisa agreed to sell a 70% stake in its high income Alphaville Urbanismo unit to Blackstone Group L.P. (BX) and Brazil's Patria Investimentos Ltda. for 1.4 billion Brazilian reais ($645 million).
"Although the proceeds from the sale should reflect primarily in reduction of net leverage, the company's capital structure and prospective consolidated debt profile will be more clearly defined only after the completion of this transaction," Moody's said.
The company's net debt totaled BRL2.52 billion in the second quarter, the most recent figure available, compared with BRL2.45 billion in the first quarter.