Fitch lowers Oi, Portugal Telecom

Fitch Ratings said it downgraded Oi SA’s long-term foreign- and local-currency issuer default ratings and Portugal Telecom SGPS’s long-term issuer default rating to BB+ from BBB-.

Fitch also said it downgraded Oi’s national long-term rating and national long-term debentures to AA(bra) from AA+(bra).

The outlook is stable.

Fitch also said it downgraded Oi’s senior unsecured and secured debt and the senior unsecured notes issued by Portugal Telecom International Finance BV to BB+ from BBB-.

The Rating Watch negative on all ratings was removed.

The downgrades follow news that Portugal Telecom’s €847 million commercial-paper investment issued by Rio Forte Investments SA was not paid on the due date of July 15 and the recovery value is highly uncertain, Fitch said.

Based on the assumption that Oi does not recover any cash from the defaulted Rio Forte commercial paper, net leverage for the merged entity will increase a modest 0.2x to 0.3x, the agency said.

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