Moody’s downgrades Oi, debt on bankruptcy filing

Moody's Investors Service said it downgraded the ratings on Oi SA’s notes guaranteed by Telemar Norte Leste SA and the unsecured debt of Oi to C.

At the same time Moody's America Latina downgraded Oi's corporate family ratings to C/C.br and the ratings on its unsecured debt to C/C.br.

Moody's also downgraded Portugal Telecom International Finance, BV’s and Oi Brasil Holdings Cooperatief UA’s unsecured debt to C. The agency believes that these notes are pari passu to unsecured debt at to the parent and guarantor, Oi.

Furthermore, the agency downgraded three specific note issuances at Oi to which benefit from a subsidiary guarantee from Telemar by two notches to C. These three issuances, the 5½% dollar-denominated notes due 2020, 9½% dollar-denominated notes due 2019 and 5 1/8% euro-denominated notes due 2017, were originally issued by Telemar but transferred to Oi.

Moody's said it believes that the Telemar guarantee is sufficient to differentiate the creditworthiness of these issuances versus other unsecured obligations of Oi, but it estimates losses on these instruments to be also associated with a C rating, preventing further differentiation on the ratings scale.

The downgrade follows Oi’s filing for judicial recovery, the closest equivalent to Chapter 11 in Brazil.

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