S&P Global Ratings has cut Cosan S.A.'s issuer credit rating to B+ from BB- and taken the company off CreditWatch with negative implications, a move that the agency confirmed on Wednesday. At the same time, S&P reduced the issue rating on perpetual notes issued by Cosan Overseas Ltd. to B+ from BB-.
The ratings action reflects what S&P describes as increased uncertainty over Cosan's divestment strategy and the consequences that uncertainty may have for the holding company's business diversification, dividend receipts from subsidiaries and its ability to cover financial obligations.
S&P explicitly ties the downgrade to the weakening of Cosan's business profile after a significant restructuring of Raízen S.A.'s liabilities. In June 2026, Raízen secured creditor support for a 65 billion Brazilian real debt restructuring plan that includes a 3.5 billion real capital injection from Shell PLC and the conversion of 45% of its debt into equity. Cosan will not participate in Raízen's capital increase, and by March 2026 Cosan had stopped recognizing Raízen's financial effects in its own accounts after impairment charges reduced the carrying amount of that investment to zero.
S&P's financial sensitivity work indicates that Cosan's interest coverage ratio - calculated by S&P as net dividends received plus interest income divided by financial cash expenses - is likely to remain below 1.0x over the next two years if no further asset divestments occur. The agency's projections show cash upstream from subsidiaries, net of preferred shares, at 1.4 billion reais in 2026 and 1.1 billion reais in 2027. By contrast, S&P estimates financial expenses near 2.9 billion reais in 2026 and about 1.7 billion reais in 2027.
S&P also noted the company's recent liability and capital moves. Since December 2025, Cosan has amortized roughly 9.0 billion reais of debt, a reduction that the agency says was supported by a 10 billion real equity follow-on and proceeds from the Compass IPO, which raised 2.3 billion reais.
On leverage, S&P expects Cosan's consolidated net leverage to be in the 2.5x-3.0x range in 2026 and to improve to roughly 2.0x-2.5x in 2027, citing a comparison with reported consolidated net leverage of 3.4x for the 12 months ended March 31, 2026. The agency's forecast for funds from operations to debt is 21.1% for 2025, with EBITDA interest coverage at 2.5x; these metrics are projected to improve toward about 28% and 3.3x, respectively, by 2027.
Management has publicly stated a goal of reaching zero net debt and has indicated it will consider strategic alternatives involving key subsidiaries such as Rumo. S&P said it could downgrade Cosan further if additional divestments materially reduce the group's diversification and weaken dividend inflows, if proceeds from asset sales do not meaningfully strengthen the holding company's capital structure, or if leverage rises because of weaker operating results or aggressive expansion.
Conversely, S&P noted an avenue to stabilize the outlook: if further divestments simplify and improve Cosan's capital structure, reduce the interest burden and produce consistently higher debt service coverage - specifically debt service coverage above 1.0x on a sustained basis - the outlook could be revised to stable.
Contextual notes and implications
From a cash-flow and balance-sheet perspective, the rating action hinges on two interrelated issues highlighted by S&P: the effect of Raízen's recapitalization on Cosan's investment value and the sufficiency of internal cash generation and planned divestments to cover near-term financial costs. S&P's forward-looking ratios and projections signal that, absent meaningful asset disposals or stronger upstream cash flows, Cosan faces a low interest-coverage environment that will constrain its financial flexibility.
The downgrade affects both the issuer rating and the issue rating on perpetual notes, which underscores S&P's view that the company's ability to service all forms of financial claims is under pressure from structural changes to its principal investments and from the level of financial expenses projected over the next two years.
Investors and counterparties will be watching management's execution on divestments and any decisions around subsidiaries that could alter dividend flows or leverage metrics. The company has taken steps to reduce gross debt since late 2025, but S&P's base case assumes that without further asset sales interest coverage remains constrained.
Disclosure