S&P puts Portugal Telecom on negative watch

Standard & Poor's said it placed Portugal Telecom SGPS SA's A- long-term corporate credit rating and A-2 short-term corporate credit rating on CreditWatch with negative implications following the announcement of an unsolicited offer for all of the company's outstanding shares and convertible bonds by industrial holding group Sonae SGPS SA.

S&P said the CreditWatch placement reflects the possibility that, if successful, the proposed acquisition could result in a significant increase in Portugal Telecom's indebtedness, exposing bondholders to higher risks.

The ratings reflect the group's established position in the Portuguese telecoms market, increasing domestic competitive and regulatory pressures and strong profitability, the agency said.

This is balanced by significant operating pressure on the group's domestic operations, significant exposure to the volatility of the Federative Republic of Brazil (BB-/positive/B), fierce competition in the Brazilian mobile market and ongoing but manageable pressure on its domestic fixed-line operations.

Consolidated net adjusted debt to EBITDA is 2.5x.

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