Moody's rates Embraer note Baa3

Moody's Investors Service said it assigned a Baa3 rating to Embraer Overseas Ltd.'s proposed $300 million senior unsecured notes due 2017, which will be unconditionally guaranteed by Brazil-based Embraer-Empresa Brasileira de Aeronautics SA.

The outlook is stable.

The proceeds of the issuance will be used to refinance some of the company's near-term maturities.

The agency said the Baa3 rating considers the unconditional guarantee of Embraer, which will effectively rank the notes pari-passu with the company's existing senior unsecured debt; the fact that the refinancing will extend and smooth the company's debt maturity profile, which currently includes more than $600 million of maturities in 2007 and 2008; Moody's expectation that the notes will result in a reduction in Embraer's interest costs; and the company's strong competitive position in the regional jet market.

These positives are balanced against earnings pressures from the relatively high Brazilian real exchange rate, current industrial inefficiencies and cash flow demands created by the company's recent entry into the business jet market, Moody's said.

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