Moody’s drops Embraer notes to Ba1

Moody's Investors Service said it downgraded the foreign currency senior unsecured notes issued by Embraer SA, Embraer Overseas Ltd. and Embraer Netherlands Finance BV to Ba1 from Baa3.

At the same time, the agency withdrew Embraer SA's Baa3 domestic currency issuer ratings and assigned a Ba1 corporate family rating to the company.

The outlook for all ratings remains negative.

"The downgrade of Embraer's ratings to Ba1 was prompted by Moody's decision to downgrade Brazil's government bond rating to Ba2 from Baa3," Moody's vice president, senior analyst Cristiane Spercel said in a news release.

"Embraer's Ba1 rating now ranks one notch above Brazil's government bond rating of Ba2, which is granted only on an exceptional basis for issuers that are fundamentally stronger than the sovereign. In the case of Embraer, this is evidenced by its significant revenue diversification, strong liquidity and limited exposure to devaluation of local currency through revenues generated outside of Brazil, which are sufficient to service its near-term debt servicing obligations. These factors outweigh Embraer's close links with the Brazilian economy and the local government."

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