Fitch Places AgeRio on Rating Watch Negative Following Action on Parent

RIO DE JANEIRO--()--Fitch Ratings has today placed Agencia de Fomento do Estado do Rio de Janeiro S.A.'s (AgeRio) ratings on Rating Watch Negative. A full list of rating actions follows at the end of the release.

KEY RATING DRIVERS - IDRS, NATIONAL RATINGS, SUPPORT RATINGS

The rating action mirrors the recent action on Agerio's parent, the State of Rio de Janeiro (ERio, Long-Term Foreign Currency and Local Currency IDRs 'B+'/Rating Watch Negative), which was taken following a missed debt service payment by ERio. It reflects the downside risks with respect to ERio's capacity to support AgeRio, should the need arise. (For more details see 'Fitch Places State of Rio de Janeiro on Rating Watch Negative', dated May 25, 2016 at 'www.fitchratings.com'.)

AgeRio's ratings are driven by expected support from ERio and are aligned with those of its parent. Fitch views AgeRio as strategically important to ERio, as it acts as the state's development arm and implements its economic development policies. A track record of frequent capital injections by ERio, most recently in the second half of 2015, reinforces Fitch's view. ERio controls 99.99% of AgeRio. Furthermore, by state law ERio's stake in AgeRio's voting shares cannot fall below 51%, and it is the financial agent or administrator of three state funds. Fitch does not assign a Viability Rating to AgeRio, as it is a development agency.

As of December 2015, AgeRio remained highly capitalized with a total regulatory capital ratio of 75.30% (70.95% in December 2014). The development agency's overall profitability fell but remained adequate, as a solid increase in fee income broadly offset a large increase in loan impairment charges. Average ROA stood at 1.07% (1.49% in December 2014). In the same period, AgeRio's impaired loans classified in the D-H range of the central bank's risk scale rose to 6.54% of total loans (5.37% in December 2014), while impaired loan coverage by reserves rose significantly to 223.9% (89.67% in December 2014).

RATING SENSITIVITIES

IDRS, NATIONAL RATINGS, SUPPORT RATINGS

Changes in Parental Support: AgeRio's ratings are linked to those of ERio. In case of an additional negative rating action on ERio, AgeRio's ratings would be subject to a review to assess this rating action's impact on the overall creditworthiness of AgeRio. This, in turn, could lead to a negative rating action on the development agency.

Fitch has placed the following ratings for AgeRio on Rating Watch Negative:

--Foreign and Local Currency Long-Term IDRs 'B+';

--Foreign and Local Currency Short-Term IDRs 'B';

--Long-term National Rating 'A-(bra)';

--Short-term National Rating 'F1(bra)';

--Support Rating '4'.

Additional information is available on www.fitchratings.com.

Applicable Criteria

Global Bank Rating Criteria (pub. 20 Mar 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=863501

National Scale Ratings Criteria (pub. 30 Oct 2013)

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

Additional Disclosures

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1005354

Endorsement Policy

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

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

Contacts

Fitch Ratings
Primary Analyst
Esin Celasun
Director
+55 21 4503-2626
Fitch Ratings Brasil Ltda.
Praca XV de Novembro, 20 - 401 B,
Rio de Janeiro, RJ, Brasil
or
Secondary Analyst
Paulo Fugulin
Director
+55 11 4504-2206
or
Committee Chairperson
Veronica Chau
Senior Director
+52 818 399 9169
or
Media Relations:
Elizabeth Fogerty, New York, +1 212-908-0526
Email: elizabeth.fogerty@fitchratings.com

Contacts

Fitch Ratings
Primary Analyst
Esin Celasun
Director
+55 21 4503-2626
Fitch Ratings Brasil Ltda.
Praca XV de Novembro, 20 - 401 B,
Rio de Janeiro, RJ, Brasil
or
Secondary Analyst
Paulo Fugulin
Director
+55 11 4504-2206
or
Committee Chairperson
Veronica Chau
Senior Director
+52 818 399 9169
or
Media Relations:
Elizabeth Fogerty, New York, +1 212-908-0526
Email: elizabeth.fogerty@fitchratings.com