Moody's may downgrade Embratel

Moody's Investors Service said it placed the Baa3 global local-currency issuer rating, Baa3 foreign-currency senior unsecured rating and Aaa.br Brazilian national scale rating of Empresa Brasileira de Telecomunicacões SA (Embratel) on review for possible downgrade.

The review was prompted by the announcement that Telefonos de Mexico, SA de CV (Telmex), the company's 98% owner, will spin off all its Latin American businesses and its Mexican yellow pages business to a new holding company named Telmex Internacional. If the spinoff is approved, Embratel will no longer be a subsidiary of the A2-rated Telmex and the agency said its expectation with regard to the probability of support from Telmex will change.

The review will assess the impact of the new corporate structure on the probability that Embratel would receive external support, the expected credit strength of Telmex International and the degree to which possible support from Telmex International should be incorporated into the ratings.

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