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Rating Action:

Moody's assigns (P) Ba1 / (P) Aaa.br ratings to the 1st and 2nd series of the 20th issuance of agribussines certificates issued by Vert Securitizadora

 The document has been translated in other languages

11 Nov 2018

Approximately BRL 750 million of certificates rated

Sao Paulo, November 11, 2018 -- Moody's América Latina (Moody's) has assigned provisional ratings of (P) Ba1 (Global Scale, Local Currency) and (P) Aaa.br (Brazilian National Scale) to the 1st and 2nd series of agribusiness certificates ("certificados de recebíveis do agronegócio" or CRA) issued by Vert Companhia Securitizadora (Vert, the Issuer or the Securitizadora). The certificates are backed by two series of senior unsecured debentures rated Ba1 (Global Scale, Local Currency) and Aaa.br (Brazilian National Scale) issued by Ipiranga Produtos de Petróleo S.A. (Ipiranga) and guaranteed by Ultrapar Participações S.A. (Ultrapar; rated Ba1 long-term corporate family ratings Global Scale, Local Currency, and Aaa.br, Brazilian National Scale). Ipiranga, in agreement with the arranger, has the option to issue additional CRA ("lote adicional" and "lote suplementar"), up to a maximum issuance amount of BRL 900 million. Any additional issuance will follow an additional issuance of debentures. The proceeds of the issuance will be directed to finance purchases of ethanol.

Issuer / Securitizadora: Vert Companhia Securitizadora

1st and 2nd Series of the 20th issuance, rated (P) Ba1 (Global Scale, Local Currency) / (P) Aaa.br (Brazilian National Scale)

The provisional ratings address the structure and characteristics of the transaction based on the information provided to Moody's. Certain issues related to this transaction have yet to be finalized. Upon conclusive review of all documents and legal information as well as any subsequent changes in information, Moody's will endeavor to assign definitive ratings to the CRA issuances. If any assumptions or factors considered by Moody's in assigning the ratings change, Moody's could change the ratings assigned to the CRA.

RATINGS RATIONALE

The (P) Ba1 (Global Scale, Local Currency) and (P) Aaa.br (Brazilian National Scale) ratings assigned to the CRA are primarily based on the willingness and ability of Ultrapar (as guarantor) to honor the payments defined in the transaction documents, thich is reflected by the Ba1 (Global Scale, Local Currency) and Aaa.br (Brazilian National Scale) ratings of the underlying senior unsecured debentures backing the CRA issuances. Any change in the ratings of the debentures will lead to a change in the ratings of the CRA.

Each CRA series to be issued by Vert will be backed by a series of debentures issued by Ipiranga and guaranteed by Ultrapar. The underlying senior unsecured debentures are rated Ba1 and Aaa.br. Ipiranga and Ultrapar will be responsible for covering all transaction expenses.

The 1st series of CRA are floating rate notes, indexed to a percentage of the DI (interbank deposit rate); the percentage is yet to be determined. Interest will be paid on a semiannual basis, followed by a balloon payment of principal at the legal final maturity in December 2023.

The 2nd series of CRA feature a fixed interest rate and a principal balance that will be adjusted by the IPCA (Extended National Consumer Price Index) inflation index and will pay a coupon; the rate of interest is yet to be determined. Interest will be paid on an annual basis, followed by a balloon payment of principal at the legal final maturity in December 2025.

The sum of the two series will total BRL 750 million, without considering the additional issuance.

The provisional ratings on the CRA are based on a number of factors, among them the following:

- The willingness and ability of Ultrapar (as guarantor) to make payments on each series of the underlying debentures, rated Ba1 and Aaa.br.

- Pass through structure: the payment schedule of each series of CRA replicates the scheduled cash flow of the underlying debentures, with a one-day lag, which allows adequate timing to make payments on the CRA. The CRA will make payments that mirror the payments to be made by the underlying debentures. The floating rate of DI to be paid under the 1st series will be determined using the same DI period under the underlying debenture. The principal balance of the 2nd series will be adjusted by the same IPCA index used to adjust the underlying debentures. Also, the coupon will be calculated considering the same interest rate and accrual period. In addition, to mitigate the risk of the additional one day of interest for the first interest payment on the CRA, the debentures will initially feature one extra day of interest accrual to address any potential interest rate mismatch.

- The events of default (EOD) on the CRA mirror those of the underlying debentures. Therefore, the risk of having an EOD on the certificates while the underlying assets are current is eliminated.

- Ipiranga or Ultrapar, in the last instance, will pay the CRA expenses: Ipiranga or Ultrapar will be responsible, under the transaction documents, for all CRA expenses. Nonetheless, the transaction has recourse to Ultrapar, in the event that Ipiranga misses any payment of expenses.

- Ipiranga's payment obligations, are covered by the guarantee provided by Ultrapar, which is the holding company from Ipiranga, under the terms of the debentures and trust expenses related to the CRA issuance. The senior unsecured ratings assigned to the underlying debentures issued by Ipiranga (as debtor) are the same as the guarantor's senior unsecured debt ratings.

- No commingling risk: Ipiranga will make the payments due on the two series of debentures directly to the respective accounts of each series of CRA held at Banco Bradesco S.A. (Ba2 long-term bank deposit rating, Global Scale, Local Currency; and Aa1.br, Brazilian National Scale).

- Segregated assets: The CRAs benefit from a fiduciary regime ("regime fiduciário") whereby the assets backing each series of CRA are segregated. These segregated assets are destined exclusively for payments on the CRA as well as certain fees and expenses, and will be segregated from all of the other assets on the issuer's balance sheet. However, the transaction is subject to residual legal risk because Vert agribusiness credits can be affected by the securitization company's tax, labor and pension creditors. (For more information, see the "Fiduciary Regime and Segregation of Assets" section in the Pre-sale Report)

Ultrapar is headquartered in São Paulo, Brazil, and engaged in fuel (Ipiranga) and liquefied petroleum gas (Ultragaz) distribution, specialty chemicals production (Oxiteno), storage for liquid bulk (Ultracargo) and retail drugstore (Extrafarma). In 2017 Ultrapar reported consolidated net revenues of BRL 80 billion (about USD 25 billion). Ipiranga is the group's largest business segment, representing 85% of consolidated net revenues and 77% of EBITDA in the same period.

Ultrapar's ratings primarily reflect the company's solid business model, low risk profile, stable cash flows and leading position in different segments. Over the past few years the company demonstrated its ability to post robust growth across all business lines and to sustain conservative credit metrics and strong cash generation even under adverse market conditions and sizable investment plan.

On the other hand, the ratings are primarily constrained by the Government of Brazil's Ba2 rating (outlook: stable). The company's acquisitive growth strategy and its dependence on a few key suppliers for raw materials are additional negative rating considerations. To a lesser extent, the more cyclical nature of its specialty chemicals business is also viewed as credit negative.

Ultrapar's Ba1 Corporate Family Rating ratings stand one notch above Brazil's Government rating. Granted only on an exceptional basis, the notching represents a fundamental corporate profile that is stronger than the sovereign's government bond rating. This is evidenced by the resilient nature of Ultrapar's cash flows and financial flexibility, which allow it to withstand Brazil's weakened economic and fiscal condition.

Vert was established in 2016 and is headquartered in São Paulo. The securitization company is focused on structuring CRA with large and renowned sponsors in the agricultural industry. Vert is audited by Grant Thornton and since the beginning of its operations, the securitization company has issued 18 different securitizations totaling BRL 5.5 billion.

The principal methodology used in these ratings was "Moody's Approach to Rating Repackaged Securities" published in June 2015. Please see the Rating Methodologies page on www.moodys.com.br for a copy of this methodology.

Factors that would lead to an upgrade or downgrade of the ratings:

Any changes in the senior unsecured ratings of the underlying debentures will lead to a change in the ratings on the CRA.

Moody's National Scale Credit Ratings (NSRs) are intended as relative measures of creditworthiness among debt issues and issuers within a country, enabling market participants to better differentiate relative risks. NSRs differ from Moody's global scale credit ratings in that they are not globally comparable with the full universe of Moody's rated entities, but only with NSRs for other rated debt issues and issuers within the same country. NSRs are designated by a ".nn" country modifier signifying the relevant country, as in ".za" for South Africa. For further information on Moody's approach to national scale credit ratings, please refer to Moody's Credit rating Methodology published in May 2016 entitled "Mapping National Scale Ratings from Global Scale Ratings". While NSRs have no inherent absolute meaning in terms of default risk or expected loss, a historical probability of default consistent with a given NSR can be inferred from the GSR to which it maps back at that particular point in time. For information on the historical default rates associated with different global scale rating categories over different investment horizons, please see https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1113601.

REGULATORY DISCLOSURES

For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions of the disclosure form.

This transaction is considered as structured finance product in accordance with Instrução CVM nº 521.

Moody's either did not receive or take into account one or more third-party due diligence assessment(s) regarding the underlying assets or financial instruments (the "Due Diligence Assessment(s)") in this credit rating action.

The Due Diligence Assessment(s) referenced herein were prepared and produced solely by parties other than Moody's. While Moody's uses Due Diligence Assessment(s) only to the extent that Moody's believes them to be reliable for purposes of the intended use, Moody's does not independently audit or verify the information or procedures used by third-party due-diligence providers in the preparation of the Due Diligence Assessment(s) and makes no representation or warranty, express or implied, as to the accuracy, timeliness, completeness, merchantability or fitness for any particular purpose of the Due Diligence Assessment(s).

Moody's did not use any models, or loss or cash flow analysis, in its analysis.

Moody's did not use any stress scenario simulations in its analysis.

Information sources used to prepare the rating are the following: parties involved in the ratings and public information.

Information types used to prepare the rating are the following: debt documentations, legislation, by-laws and legal documents, public information, Moody's information, and regulatory filings.

Sources of Public Information: Moody's considers public information from many third party sources as part of the rating process. These sources may include, but are not limited to, the list available in the link http://www.moodys.com/viewresearchdoc.aspx?docid=PBC_193459.

Moody's considers the quality of information available on the rated entity, obligation or credit satisfactory for the purposes of issuing a rating.

Moody's adopts all necessary measures so that the information it uses in assigning a rating is of sufficient quality and from sources Moody's considers to be reliable including, when appropriate, independent third-party sources. However, Moody's is not an auditor and cannot in every instance independently verify or validate information received in the rating process.

The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.

Please see the ratings disclosure page on www.moodys.com.br for general disclosure on potential conflicts of interests.

Moody's America Latina Ltda. may have provided Other Permissible Service(s) to the rated entity or its related third parties within the 12 months preceding the credit rating action. Please go to the report "Ancillary or Other Permissible Services Provided to Entities Rated by Moody's America Latina Ltda." in the link http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1147430 for detailed information.

Entities rated by Moody's America Latina Ltda. and the rated entities' related parties may also receive products/services provided by parties related to Moody's America Latina Ltda. engaging in credit ratings activities within the 12 months preceding the credit rating action. Please go to the link http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1147431 for a list of entities receiving products/services from these related entities and the products/services received.

Moody's ratings are constantly monitored, unless designated as point-in-time ratings in the initial press release. All Moody's ratings are reviewed at least once during every 12-month period.

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.br.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Please see ratings tab on the issuer/entity page on www.moodys.com.br for the last rating action and the rating history. The date on which some ratings were first released goes back to a time before Moody's ratings were fully digitized and accurate data may not be available. Consequently, Moody's provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com.br for further information.

Please see Moody's Rating Symbols and Definitions on the Ratings Definitions page on www.moodys.com.br for further information on the meaning of each rating category and the definition of default and recovery.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Please see www.moodys.com.br for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com.br for additional regulatory disclosures for each credit rating.

Ely Mizrahi
Asst Vice President - Analyst
Structured Finance Group
Moody's America Latina Ltda.
Avenida Nacoes Unidas, 12.551
16th Floor, Room 1601
Sao Paulo, SP 04578-903
Brazil
JOURNALISTS: 800 891 2518
Client Service: 1 212 553 1653

Karen Ramallo
Senior Vice President/Manager
Structured Finance Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Releasing Office:
Moody's America Latina Ltda.
Avenida Nacoes Unidas, 12.551
16th Floor, Room 1601
Sao Paulo, SP 04578-903
Brazil
JOURNALISTS: 800 891 2518
Client Service: 1 212 553 1653

No Related Data.
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