Fitch downgrades Portugal Telecom

Fitch Ratings said it downgraded Portugal Telecom SGPS SA's issuer default rating to BBB+ from A- and kept it on Rating Watch negative following the company's announcement that it plans to return €3 billion cash to shareholders in the next three years, should the takeover bid from Sonae SGPS fail.

Fitch said the downgrade reflects a potential weakening of Portugal Telecom's credit metrics after the cash return as well as the increasingly challenging conditions in the domestic market.

The Rating Watch reflects the ongoing uncertainty regarding the expected ownership and capital structure resulting from Sonae's bid and the potential negative impact on existing bondholders, the agency said.

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