Fitch downgrades five Brazil construction companies

Fitch Ratings said it downgraded the ratings of Odebrecht Engenharia e Construcao SA, Construtora Andrade Gutierrez SA and Construtora Queiroz Galvao SA.

Fitch also said it downgraded the bonds issued by Odebrecht Finance Ltd. and Andrade Gutierrez International SA.

The agency also said it removed the ratings of Construtora Andrade Gutierrez, Andrade Gutierrez International’s issuance and Construtora Queiroz Galvao from Rating Watch negative and assigned a negative outlook for the corporate ratings.

Fitch also said it affirmed the ratings of Camargo Correa SA and CCSA Finance Ltd. issuances and removed the Rating Watch negative.

The ratings downgraded were Odebrecht Engenharia e Construcao’s foreign- and local-currency issuer default ratings to BBB- from BBB and national scale rating to AA+(bra) from AAA(bra).

Odebrecht Finance’s R$500 million senior unsecured notes due 2018 were downgraded to BBB- from BBB, $500 million senior unsecured notes due 2020 to BBB- from BBB, $600 million senior unsecured noted due 2022 to BBB- from BBB, $800 million senior unsecured notes due 2023 to BBB- from BBB, $550 million senior unsecured notes due 2025 to BBB- from BBB, $500 million senior unsecured notes due 2029 to BBB- from BBB, $850 million senior unsecured notes due 2042 to BBB- from BBB and $750 million perpetual bonds to BBB- from BBB.

Construtora Andrade Gutierrez’s foreign- and local-currency issuer default ratings also were downgraded to BB+ from BBB-, along with its national scale rating to AA-(bra) from AA(bra).

The rating on Andrade Gutierrez International’s $500 million senior unsecured bonds due 2018 was downgraded to BB+ from BBB-.

Construtora Queiroz Galvao’s national scale rating was downgraded to A-(bra)from A(bra).

All of the corporate ratings were assigned a negative outlook, Fitch added.

The downgrades were the result of the deterioration of the business environment for the company due to the incarceration of Marcelo Odebrecht as a result of the latest phase of the Lava-Jato investigation, the agency said.

The negative outlook is a result of the ongoing nature of the Lava-Jato investigation and the deterioration of the domestic macroeconomic scenario, Fitch said.

Fitch said it remains concerned with the reputational damage it may cause in the medium term to Odebrecht Engenharia in signing new contracts and obtaining funds.

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