Moody's rates Serra do Facao debentures Ba2

Moody's America Latina Ltda. assigned provisional ratings of Ba2 on its global scale and Aa2.br on its Brazilian national scale to Serra do Facão Participacões' proposed five-year R$140 million debentures.

The agency affirmed its Ba1 global local currency issuer rating for Furnas Centrais Eletricas SA

The outlook is stable.

Proceeds will be used to replace existing promissory notes and inject capital in Serra do Facão Energia SA.

The ratings on the debentures reflect Moody's opinion that the credit risk is equal to that of Furnas from a probability-of-default perspective, the agency said.

The rating for the debentures is supported by a well-known law firm's legal opinion, according to Moody's. Furnas' issuer rating reflects its position as one of Brazil's largest electricity generation and transmission companies, with revenue and cash flow supported by long-term power agreements, the agency said.

The rating also considers risks that include currency devaluation and interest rate exposures arising from un-hedged floating rate and foreign-currency debt, and the potential for increased leverage to support capital spending, Moody's said.

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