Fitch cuts Odebrecht Engenharia, Odebrecht Finance

Fitch Ratings said it downgraded and removed from Rating Watch Negative Odebrecht Engenharia e Construcao SA's (OEC) ratings, including its foreign and local currency long-term issuer default ratings to CC from B- and its national scale long-term rating to CC(bra) from BB-(bra).

The agency also downgraded roughly $3.1 billion issuances of Odebrecht Finance Ltd., which Odebrecht Engenharia unconditionally and irrevocably guarantees, to CC/RR4 from B-/RR4. The rating reflects average recovery prospects in the event of a default, ranging between 31% to 50%.

“The downgrades reflect the increasing and substantial challenges OEC faces in 2017 to restructure its activities and recover its cash flow generation capacity amidst a continuing cash burn for parental support,” Fitch said in a news release.

“Fitch sees the company's ability to replace its backlog as further impaired after details were published by the U.S. Department of Justice (DoJ) under a plea agreement. The information published has exacerbated OEC's reputational risk and triggered a series of investigations in some countries where the company operates.”

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