Fitch downgrades Odebrecht, debt

Fitch Ratings said it downgraded Odebrecht Engenharia e Construcao SA's long-term foreign- and local-currency issuer default ratings to B- from B+ and long-term national scale rating to BB-(bra) from A-(bra).

Concurrently, the agency downgraded roughly $3.1 billion issuances of Odebrecht Finance Ltd., which Odebrecht Engenharia unconditionally and irrevocably guarantees, to B-/RR4 from B+/RR4. The B-/RR4 rating of Odebrecht Finance’s unsecured public debt reflects average recovery prospects in the event of a default, ranging between 31% and 50%.

Fitch said the downgrade reflects the difficulty Odebrecht Engenharia continues to face monetizing receivables with banks and multi-lateral agencies, which has diminished its cash position relative to historical levels.

Odebrecht Engenharia’s cash position stood at R$6 billion ($1.9 billion) as of March 31, 2016, which is a sharp decline from $4.4 billion at the end of 2014.

In order to protect its liquidity, Odebrecht Engenharia reduced activities on projects that are facing any type of issues, the agency noted.

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