Moody’s lowers Oi debt

Moody's Investors Service said it assigned a Ba1 corporate family rating to Oi SA based on the company's reduced financial flexibility and weak credit metrics, which Moody's believes will result in a weakening of Oi's competitive position.

As part of this action, the agency also downgraded the ratings on unsecured debt at Oi to Ba2, one notch below the corporate family rating due to their junior position in the capital structure. The company has significant indebtedness at subsidiary holding companies, which have a priority claim on the majority of operating cash flows.

Oi has articulated plans to reduce capital spending and may not fully participate in the upcoming 4G spectrum auction in Brazil. In addition, Oi could face operational, competitive or financial challenges related to the quickly evolving competitive environment, which includes an opportunity for consolidation through M&A.

Moody's said it believes that Oi's base business in Brazil faces margin pressure from an unfavorable product mix shift to pay TV and broadband and the price pressure inherent in its value segment target market.

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