“Aracruz is likely to post the largest financial loss among pulp and paper companies on foreign exchange derivatives losses, Reis wrote, calling the third quarter a “quarter to forget.”
[ … ]
Aracruz said last week that it may lose about $1 billion from derivative investments.”

“These rating actions follow the announcement by Aracruz on Oct. 2, 2008, that the ‘fair value’ of its derivative position was a negative $1.02 billion as of Sept. 30, 2008. This position exposes the company to heightened market volatility and potential further losses should the Brazilian real continue to weaken against the U.S. dollar. The downgrades of Aracruz’s credit ratings reflect an expectation that the company’s leverage will increase materially as it works to limit or eliminate its derivative exposure, and that it may have to delay some of its key expansion projects.”

“Votorantim Celulose e Papel SA, Brazil’s third-largest pulp and paper maker, will borrow $1.8 billion from JPMorgan Chase & Co. to help fund the acquisition of Aracruz Celulose SA shares.”

“SÃO PAULO, 8/11/08 - The preferred shares of Brazilian pulp and paper companies Aracruz Celulose and Votorantim Celulose e Papel (VCP) closed sharply downward today at the São Paulo Stock Exchange (Bovespa), falling 8.06% and 6.86% respectively.
According to Jayme Alves, analyst at Spinelli brokerage firm, the trend is due to the fact that the sector’s shares are following the performance of other stocks traded at the Brazilian exchange, due to the fall in commodity prices in the international market.
‘Besides, the sector depends on Asia and Europe. A market consensus is being created on China’s growth, which may not be that huge, rising from the current 10% to approximately 7% in coming years. This outlook ended up putting pressure on commodities,’ said Alves. (Déborah Costa/cferreira - InvestNews)”