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Moody's rates Embratel notes B2
Moody's Investors Service assigned a B2 rating to the proposed issuance of about $200 million of senior unsecured notes due 2008 to be issued by Empresa Brasileira de Telecommunicacões SA (Embratel) and guaranteed by Embratel Participacões SA.
This is the first time that Moody's is rating an obligation issued by Embratel, one of Brazil's largest telecommunications services providers. The outlook is stable.
The rating is a function of the company's underlying credit strength, the probability of a sovereign default implied by the Brazilian government's B2 foreign currency bond rating and the likelihood that, given a sovereign default, the government would impose a debt moratorium generally to companies domiciled in Brazil and specifically to debt issued by Embratel.
Moody's also confirmed its existing ratings for Embratel, including its B1 issuer rating on Moody's global local currency scale and its Baa1.br issuer rating on Moody's Brazilian national scale.
The confirmation reflects Moody's expectation that Embratel will use the proceeds from the note issuance to pay down its short-term debt, thus lengthening average debt tenor, in addition to management's intention to maintain or reduce its current level of exposure to currency devaluation risk after the issuance is completed.
The confirmation also incorporates WorldCom Inc.'s recent announcement of its intention to sell its controlling stake in Embratel's parent company, Embratel Participacões SA. Moody's noted that its ratings for Embratel reflect the company's credit quality on a stand-alone basis and do not incorporate any expected support from its current or future equity sponsors.
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