Rating Action

S&P Global Ratings on 9 July 2026 downgraded Cosan S.A.'s issuer credit rating from BB‑ to B+ and simultaneously lowered the rating on perpetual notes issued by its subsidiary Cosan Overseas Ltd. from BB‑ to B+. The agency also removed the negative CreditWatch designation that had been placed on 6 March 2026.

Diversification Weakness

The downgrade reflects a weakening of Cosan’s diversification profile after the debt restructuring of its joint‑venture Raízen S.A. In June 2026 Raízen secured support from more than 80 % of its creditors for a 65 billion‑real debt restructuring that includes a 3.5 billion‑real capital injection from Shell PLC and a conversion of 45 % of the debt into equity. Cosan chose not to participate in the capital increase, and in March 2026 it stopped recognizing Raízen’s contribution in its financial statements, writing down the investment’s carrying amount to zero.

Financial Impact

S&P projects that Cosan’s interest‑coverage ratio, defined as net dividends received plus interest income divided by financial cash expenses, will stay below 1.0 times for the next two years unless further asset sales are executed. The agency estimates cash upstream net of preferred‑share dividends of 1.4 billion reais in 2026 and 1.1 billion reais in 2027, against projected financial expenses of roughly 2.9 billion reais in 2026 and 1.7 billion reais in 2027.

Since December 2025 Cosan has amortized approximately 9.0 billion reais of debt, a process supported by a 10 billion‑real equity follow‑on and the Compass IPO, which raised 2.3 billion reais. S&P forecasts consolidated net leverage of 2.5‑3.0 times in 2026 and 2.0‑2.5 times in 2027, compared with 3.4 times for the twelve months ended 31 March 2026. Funds from operations to debt are expected to be 21.1 % in 2025, rising to about 28 % in 2027, while EBITDA‑interest coverage is projected to improve from 2.5 times in 2025 to roughly 3.3 times in 2027.

Outlook and Risks

Management has reiterated a target of achieving zero net debt and indicated willingness to consider strategic alternatives involving key subsidiaries such as Rumo. S&P warned that further divestments that erode diversification or fail to materially improve the holding company’s capital structure could trigger an additional downgrade. Conversely, if divestments simplify the group and strengthen cash flows, the outlook could be upgraded to stable.