BNDES financial package to fall short, says Fitch

On June 4 BNDES approved a BRL3 billion ($620 million) credit line to support ethanol storage, an industry that has been hard hit by lack of demand. The credit line has a two-year tenor with a 12-month grace period, and will be collateralised by ethanol. But, says Fitch, this financial package will fall short. 

Fitch's calculations predict that the credit line will benefit no more than 10% of the 28 billion litres of ethanol expected to be produced in 2020/21. They argue that the more diversified sugar and ethanol companies have enough flexibility to see them through this period, whilst the credit line is inaccessible for smaller companies experiencing financial distress. 

BNDES finances 50% of the credit line, whilst the other 50% will be provided by private banks, This hefty private bank involvement, says Fitch, will penalise smaller, financially distressed companies as the banks seek to help those with stronger credit ratings.