Fitch lifts ISA notes from junk

Fitch Ratings said it upgraded ISA Capital do Brasil SA's foreign- and local-currency issuer default ratings to BB+ from BB and its $31.6 million of notes outstanding due 2017 to BBB- from BB. The agency also upgraded Companhia de Transmissao de Energia Eletrica Paulista's national scale rating and its first debenture issuance to AA+(bra) from AA(bra).

The outlook is stable.

Fitch said the rating actions reflect the strengthening of the Brazilian electric power sector as well as its resilience during the recent global economic crisis, especially the transmission segment.

The one-notch rating uplift for ISA Capital's outstanding bonds reflects their enhanced recovery prospects due to the refinancing of the majority of the company's debt with preferred equity, leaving the bonds over-collateralized, the agency said.

ISA Capital do Brasil's ratings reflect the strong credit quality of Paulista, its sole revenue source and only operating asset. Fitch said Paulista's strong credit quality is attributable to the company's monopoly position, its stable and predictable operating cash flow and its financially sound credit profile.

The agency said ratings also reflect the noteholders' structural subordination to Paulista's obligations as well as the company's concession renewal and refinancing risks.

As of March 31, ISA Capital's consolidated leverage ratio was 2.2 times.

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