Moody's rates Telemar Norte Leste notes Baa3

Moody's Investors Service said it assigned a Baa3 foreign-currency rating with stable outlook to Telemar Norte Leste SA's proposed issuance of up to $750 million in senior unsecured notes due 2019.

The proceeds will be used to refinance short-term maturing debt related to the acquisition of Brasil Telecom Participações SA.

The agency said the Baa3 foreign-currency rating is constrained by Brazil's foreign-currency ceiling of Baa3 and is one notch below Telemar Norte Leste's Baa2 local-currency issuer rating.

Telemar Norte Leste's Baa2 rating is supported by its incumbent wireline operations with a dominant market position in its concession territory that has driven its relatively stable EBITDA margins and cash flow and by the company's prudent financial policies and track record for maintaining solid liquidity, the agency said.

The rating is principally constrained by ongoing challenges to offset declining high-margin fixed-line telephony revenues with mobile and broadband segment growth without sacrificing margins or cash flow, Moody's said.

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