S&P cuts Brazilian infrastructure companies after sovereign downgrade

By Tali Rackner

Norfolk, Va., Feb. 19 – Standard & Poor's said it took various negative rating actions on 20 Brazilian infrastructure entities and project finance transactions following its Feb. 17 downgrade of the foreign and local currency ratings on the Federative Republic of Brazil to BB/B from BB+/B and to BB/B from BBB-/A-3, respectively.

The agency lowered the global scale credit ratings to BB and the national scale credit ratings to brAA- on Duke Energy International Geracao Paranapanema SA and Itaipu Binacional. The outlook on these ratings remains negative.

S&P affirmed the BB global scale credit rating and revised the outlook on Investimentos e Participacoes em Infraestrutura SA – Invepar to negative from stable. It lowered the national scale credit rating on the company and on its core subsidiary Concessionaria Auto Raposo Tavares SA to brA+ from brAA-. The outlook on these ratings is negative.

In addition, the agency downgraded the national scale credit ratings to brAA- on Atlantia Bertin Concessoes SA, Rodovia das Colinas SA, Triangulo do Sol Auto-Estradas SA, Concessionaria Ecovias dos Imigrantes SA, Ecorodovias Concessoes e Servicos SA, Santos Brasil Participacoes SA, Autopista Planalto Sul SA and Arteris SA. The outlook on these ratings is negative.

S&P also lowered the national scale credit ratings to brAA- and kept them on CreditWatch with negative implications on CCR SA, Autoban - Concessionaria do Sistema Anhanguera Bandeirantes SA, Concessionaria da Rodovia Presidente Dutra SA and Rodonorte Concessionaria de Rodovias Integradas SA.

S&P lowered the national scale issue-level ratings to brAA- on Cachoeira Paulista Transmissora de Energia SA, Baesa - Energetica Barra Grande SA, CCR, Autoban, Concessionaria da Rodovia, Autopista Planalto Sul, Arteris, Concessionaria Ecovias dos Imigrantes, Ecorodovias Concessoes e Servicos and Santos Brasil.

The outlook on Cachoeira Paulista's issue-level rating is negative, while CCR and its subsidiaries' issues remain on CreditWatch with negative implications.

The agency downgraded the national scale issue-level ratings on Rodovia das Colinas and Triangulo do Sol to brAA.

It also lowered the national scale issue-level ratings Auto Raposo Tavares and Iracema Transmissora de Energia to brA+. The outlook on Iracema’s issue-level rating is negative.

Finally, S&P cut the brAA- preliminary national scale issue-level rating on Metrobarra to brA+. The outlook is negative.

S&P said the action on the Republic of Brazil reflects its considerable political and economic challenges and the expectation of a now more prolonged adjustment process with a slower correction in fiscal policy as well as another year of steep economic contraction.

Execution risks to corrective fiscal policy remain high in the near-term following the inability to pass some budgetary measures in late 2015, which are now complicated by impeachment proceedings.

With a GDP per capita expected to decline to about $7,300 in 2016, Brazil's growth prospects are, in the agency’s opinion, below that of other countries at similar stage of development. It estimates that real GDP contracted by 3.6% in 2015 and expects it to contract again 3% this year, before resuming growth in 2017.

The negative outlook on the sovereign reflects S&P’s view that there is a greater than a one-in-three likelihood that it could lower Brazil's ratings again.

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