Fitch Affirms Rede Energia's and Cemat's IDRs

SAO PAULO--(BUSINESS WIRE)--Fitch Ratings has affirmed the following ratings for Rede Energia S.A. (Rede Energia) and Centrais Eletricas Matogrossenses S.A. (Cemat):

Rede Energia:

--Local and Foreign Currency Issuer Default Ratings (IDRs) at 'D';

--Long Term National Scale Rating at 'D(bra)';

--USD575 million perpetual notes long-term rating at 'C/RR5';

--BRL370 million debenture issuance at 'C(bra)'.

Cemat:

--Local and Foreign Currency IDRs at 'RD';

--Long Term National Scale Rating at 'RD(bra)'.

Fitch has revised the Recovery Rating on Rede Energia's perpetual notes to 'RR5' from 'RR4', which reflects the expectation of a below average recovery.

Key Rating Drivers:

Rede Energia's ratings continue to reflect its bankruptcy protection, which was filled in Brazil on Nov. 23, 2012 and accepted on Jan. 14, 2013. The perpetual notes and the debenture issuance fall under the bankruptcy protection.

Cemat's ratings are based on Fitch's view that the debt exchange of certain of Cemat's obligations, including its second and fourth local debentures issuances, are distressed debt exchanges under Fitch's 'Distressed Debt Exchange Criteria', published Aug. 8, 2012. Although the investors agreed with the new conditions of these issuances, Fitch understands that they resulted in a significant change in the original contractual terms, aiming at avoiding an event of default. Cemat is also currently under intervention by the Brazilian power regulatory agency (Agencia Nacional de Energia Eletrica - Aneel) and, along with Rede Energia and other holding companies and distribution companies, should have its ownership control sold to Equatorial Energia S..A and CPFL Energia S.A., with a minimum capital injection in the group of BRL773 million.

Fitch will monitor the execution of Rede Energia's and Cemat's change of control and recovery plan. As soon as the debt restructuring plan is executed and the administrative intervention of Aneel in Rede Energia's energy distribution concessions, in place since August 2012, is suspended, the agency will reassess the assigned ratings for both Rede Energia and Cemat.

Rating Sensitivities:

Positive rating actions could be driven by the conclusion of the sale of Rede Energia and its subsidiaries' ownership control to Equatorial Energia and CPFL Energia.

Additional information is available at 'www.fitchratings.com'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.

Applicable Criteria and Related Research:

--'Corporate Rating Methodology' (Aug. 8, 2012);

--'Distressed Debt Exchange Criteria' (Aug. 8, 2012).

Applicable Criteria and Related Research:

Corporate Rating Methodology

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=684460

Distressed Debt Exchange Criteria for Structured Finance

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=683152

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