Fitch Places All Brazilian Construction Companies on Rating Watch Negative

SAO PAULO--()--Fitch Ratings has placed the ratings of all Brazilian heavy construction companies on Rating Watch Negative. This action reflects Fitch's concerns about the financial and business impact upon these corporates of corruption allegations regarding contracts between Petrobras and multiple companies in the sector. As the federal investigation continues, key areas of concern include:

--The financial impact upon the companies of a more challenging operating environment due to the high concentration of the backlog of several companies with the government;

--Potential suspensions, delays, or partial writedowns of existing receivables and claims with Petrobras;

--Potential restructuring, suspension, or delays under existing contracts between Petrobras and certain corporates in the sectors;

--Increased scrutiny of any existing or future contracts with Petrobras or any other government entity;

--The inability of certain companies in the sector to participate in future projects with government entities;

--A reduction in access to funding from private banks, capital markets, and government related entities such as BNDES;

--A slowdown in the pace of private concession agreements, since corporates in this sector often act as investors, operators and/or contractors;

--Probable financial penalties.

The degree of impact of the increasingly negative operating environment will vary by company. More clarity on these issues is expected within six months and individual ratings will be adjusted accordingly.

Fitch has placed the following ratings on Rating Watch Negative:

Camargo Correa S.A.:

--Foreign currency Issuer Default Rating (IDR) 'BB';

--Local currency IDR 'BB';

--National long term rating 'AA-(bra)';

--National short term rating 'F1(bra)';

--BRL1 billion debentures 2nd issuance due 2014 'AA-(bra)'.

CCSA Finance Limited:

--Foreign currency IDR 'BB';

--Local currency IDR 'BB';

--US$250 million senior unsecured bonds due 2016 'BB'.

Construtora Andrade Gutierrez S.A.

--Foreign currency IDR 'BBB-';

--Local currency IDR 'BBB-';

--National scale rating 'AA(bra)'.

Andrade Gutierrez International S.A.

--US$500 million senior unsecured bonds due 2018 'BBB-'.

Construtora Norberto Odebrecht S.A.:

--Foreign currency IDR 'BBB';

--Local currency IDR 'BBB';

--National scale rating 'AAA(bra)'.

Odebrecht Finance Limited:

--Foreign currency IDR 'BBB';

--BRL500 million senior unsecured notes due 2018 'BBB';

--USD500 million senior unsecured notes due 2020 'BBB';

--USD600 million senior unsecured noted due 2022 'BBB';

--USD800 million senior unsecured notes due 2023 'BBB';

--USD550 million senior unsecured notes due 2025 'BBB';

--USD500 million senior unsecured notes due 2029 'BBB';

--USD850 million senior unsecured notes due 2042 'BBB';

--USD750 million perpetual bonds 'BBB'.

OAS S.A.:

--Foreign currency IDR 'B+';

--Local currency IDR 'B+';

--National scale rating 'BBB+(bra)';

--BRL300 million debentures 3rd issuance due 2016 'BBB+(bra)';

--BRL250 million debentures 4th issuance due 2027 'BBB+(bra)';

--BRL300 million debentures 5th issuance due 2015 'BBB+(bra)'.

Construtora OAS S.A.:

--Foreign currency IDR 'B+';

--Local currency IDR 'B+';

--National scale rating 'BBB+(bra)'.

OAS Investments GmbH:

--Foreign currency IDR 'B+';

--USD850 million senior unsecured notes due 2019 'B+'/'RR4'.

OAS Finance Ltd.:

--USD500 million perpetual bonds 'B+'/'RR4'.

--USD400 million senior unsecured noted due 2021 'B+'/'RR4'.

Construtora Queiroz Galvao S.A.:

--National scale rating 'AA-(bra)'.

Galvao Participacoes S.A.:

--Foreign currency IDR 'B+';

--Local currency IDR 'B+';

--National scale rating 'BBB+(bra)';

--BRL300 million senior unsecured notes due 2020 'BBB+(bra)'.

Galvao Engenharia S.A.:

--National scale rating 'BBB+(bra)'.

In conjunction with these actions, Fitch has downgraded the foreign and local currency Issuer Default Ratings (IDR) of Mendes Junior Trading e Engenharia S.A. (MJTE) to 'B-' from 'B' and its national scale rating to 'BB(bra)' from 'BBB(bra)'. MJTE's ratings also remain on Rating Watch Negative.

MJTE is the most vulnerable corporate in the sector to a deterioration in the market's perception of the industry due to its weak liquidity position. As of June 30, 2014, MJTE's cash balance was BRL50 million and it had BRL189 million of short-term debt.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research:

--'Corporate Rating Methodology' (May 28, 2014);

--'National Scale Ratings Criteria' (Oct. 30, 2013).

Applicable Criteria and Related Research:

Corporate Rating Methodology - Including Short-Term Ratings and Parent and Subsidiary Linkage

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=749393

National Scale Ratings Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=720082

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=928695

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Contacts

Fitch Ratings
Primary Analyst
Alexandre Garcia
Associate Director
+55-11-4504-2616
Fitch Ratings Brasil Ltda
Alameda Santos, 700 - 7 andar -
Sao Paulo - SP - CEP: 01418-100
or
Phillip Wrenn
Associate Director
+1-312-368-2075
or
Gisele Paolino
Director
+55-21-4503-2624
or
Ricardo Carvalho
Senior Director
+55-21-4503-2627
or
Joe Bormann, CFA
Managing Director
+1-312-368-3349
or
Committee Chairperson
Mauro Storino
Senior Director
+55-21-4503-2625
or
Media Relations
Alyssa Castelli, +1 212-908-0540
alyssa.castelli@fitchratings.com

Contacts

Fitch Ratings
Primary Analyst
Alexandre Garcia
Associate Director
+55-11-4504-2616
Fitch Ratings Brasil Ltda
Alameda Santos, 700 - 7 andar -
Sao Paulo - SP - CEP: 01418-100
or
Phillip Wrenn
Associate Director
+1-312-368-2075
or
Gisele Paolino
Director
+55-21-4503-2624
or
Ricardo Carvalho
Senior Director
+55-21-4503-2627
or
Joe Bormann, CFA
Managing Director
+1-312-368-3349
or
Committee Chairperson
Mauro Storino
Senior Director
+55-21-4503-2625
or
Media Relations
Alyssa Castelli, +1 212-908-0540
alyssa.castelli@fitchratings.com