Moody's: Araucaria notes B1

Moody's America Latina said it assigned a B1 rating on the global scale and a Baa1.br local currency rating on the Brazilian national scale to the 18-year R$95.5 million senior secured amortizing debentures issued by Araucaria Saneamento SA.

Moody's said the B1/Baa1.br ratings reflect Araucaria's construction and operational risks, the highly leveraged financing structure, the relatively limited financial strength of the sponsors, the solid credit profile of Sabesp, and the guarantees provided by the sponsors and the company to mitigate project risks.

Nevertheless, the construction period presents higher risk than the operating period; therefore, the ratings are constrained until the Project: (a) is completed; (b) is accepted by Sabesp; and (c) has demonstrated adequate operating performance, Moody's said.

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