Fitch Downgrades Brazil Loan Trust I Notes to 'BB+sf'; Outlook Remains Negative

SAO PAULO--()--Fitch Ratings downgrades the rating assigned to the senior secured pass-through notes issued by Brazil Loan Trust I (the issuer) as follows:

--USD661.9 million notes to 'BB+sf' from 'BBB-sf'; Outlook Negative.

The transaction is a pass-through securitization of a 10-year amortizing loan originated by Bank of America N.A. ('A+'/Outlook Stable) to the Brazilian State of Maranhao ('BB'/Outlook Negative). The loan is guaranteed on an unconditional and irrevocable basis by the Federative Republic of Brazil (Brazil; 'BB+'/Outlook Negative).

Payments on the loan are made to a bank account at Wilmington Trust N.A. (administrative agent; 'A'/Outlook Stable). On the next day, funds are transferred to an issuer account at the Bank of New York Mellon (indenture trustee; 'AA'/Outlook Stable). Payments are made on the notes immediately thereafter.

Fitch's rating addresses timely payment of interest and principal.

KEY RATING DRIVERS

The downgrade of the senior secured pass-through notes follows Fitch's downgrade of Brazil's sovereign long-term Issuer Default Ratings (IDRs) to 'BB+' from 'BBB-', which reflects the economy's deeper recession than previously anticipated, continued adverse fiscal developments and the increased political uncertainty that could further undermine the government's capacity to effectively implement fiscal measures to stabilize the growing debt burden. The Negative Outlook on the notes mirrors the Negative Outlook on the sovereign IDRs. Under the transaction, Brazil pledges its full faith and credit to the loan, and such contingent liability ranks pari passu with all of its other existing and future foreign currency debt.

The rating also considers the timely payments of interest and principal due to date. All semiannual payments due until July 2015 were made directly by the State of Maranhao. The next interest and principal payment date in Jan. 8, 2016.

RATING SENSITIVITIES

The rating assigned to the notes is sensitive to changes in the credit quality of Brazil as guarantor on an unconditional and irrevocable basis. The transaction's rating is equivalent to the higher of Brazil's long-term or Maranhao's long-term rating. Brazil's rating remains higher than the long-term rating of Maranhao.

Additional information is available at www.fitchratings.com.

Sources of Information:

In addition to the sources of information identified in the master criteria, this action was additionally informed by information from Banco do Brasil S.A.

Applicable Criteria

Counterparty Criteria for Structured Finance and Covered Bonds (pub. 14 May 2014)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=744158

Global Rating Criteria for Single- and Multi-Name Credit-Linked Notes (pub. 09 Mar 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=863276

Global Structured Finance Rating Criteria (pub. 06 Jul 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=867952

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=996949

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=996949

Endorsement Policy

https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31

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Contacts

Fitch Ratings
Primary Analyst
Robert Krause
Director
+55 11 4504 2211
Fitch Ratings Ltda.
Alameda Santos 700, 7th Floor
Sao Paulo - SP
or
Committee Chairperson
Jayme Bartling
Senior Director
+55 11 4504 2602
or
Media Relations:
Elizabeth Fogerty, +1 212-908-0526
elizabeth.fogerty@fitchratings.com

Contacts

Fitch Ratings
Primary Analyst
Robert Krause
Director
+55 11 4504 2211
Fitch Ratings Ltda.
Alameda Santos 700, 7th Floor
Sao Paulo - SP
or
Committee Chairperson
Jayme Bartling
Senior Director
+55 11 4504 2602
or
Media Relations:
Elizabeth Fogerty, +1 212-908-0526
elizabeth.fogerty@fitchratings.com