S&P downgrades Oi

Standard & Poor’s said it lowered the corporate credit and issue ratings on Oi SA to BB- from BB+.

The outlook remains negative.

The recovery ratings on the issues is unchanged at 4.

The agency also said it lowered the national scale ratings to brA- from brAA+.

The downgrades reflect an expectation that Oi will show higher debt levels and therefore weaker cash flow leverage metrics amid worsening macroeconomic conditions in Brazil, S&P said.

While the agency said it previously expected the company to increase EBITDA generation and profitability more rapidly due to cost-cutting initiatives, it now believes this will be delayed as higher inflation and currency depreciation put more pressure on its cost structure.

The higher cost of debt linked to basic interest rates in Brazil also is impairing Oi’s plans to improve its cash flow generation, S&P said.

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