S&P rates ISA Capital do Brasil notes BB-

Standard & Poor's said it assigned a BB corporate credit rating to ISA Capital do Brasil SA and a BB- rating to the company's $554 million senior notes.

The outlook is positive.

ISA Capital do Brasil is a special-purpose financing entity that will issue the bonds and on-lend the funds to Interconexión Electrica SA ESP (BB/positive), which used debt to finance the acquisition of Companhia de Transmissao de Energia Elétrica Paulista in 2006. The notes will be structured with a bullet maturity and will contain a security package consisting of current and future Energia Elétrica Paulista shares.

The agency said the rating on the notes reflect their structural subordination and the corporate credit rating reflects the challenges that ISA Capital do Brasil faces in operating in Brazil's economic and political environment, the risk of foreign exchange since the cash flow generation is in reals and the refinancing risk associated with the bullet structure payment corresponding to the notes' principal amortization.

These challenges are partially offset by a stable regulatory environment for the transmission companies in Brazil for the past 10 years, the company's satisfactory business risk profile, funds from operations to total debt coverage of 27% and a structure that includes a debt-service reserve account covering six months of interest payments, S&P said.

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