Moody's may downgrade MetroRio

Moody's Investors Service said it placed Concessao Metroviaria do Rio de Janeiro SA (MetroRio)'s corporate family rating of Ba2 on the global scale rating and the Aa2.br national scale rating on review for downgrade.

This action was prompted by the perception of increased credit risk for MetroRio's credit quality following the planned issuance of up to $650 million long-term notes issue by Investimentos e Participacoes em Infraestrutura SA (Invepar), which will be unconditionally and irrevocably guaranteed by MetroRio and its related company Linha Amarela SA (Lamsa) on a joint and several basis, Moody's said.

The ratings are based on an assumption the company is exposed to the credit quality of Lamsa, but is generally ring-fenced and insulated from cash transfers to support the high level of investment activity of its controlling shareholder, Invepar, Moody's explained.

But, Invepar's proposed notes' indenture will include cross-default provisions that suggest higher credit linkages between MetroRio and the parent's other riskier businesses, the agency said.

The ratings are underpinned by the company's strong and predictable operating cash flows, supported by a long-term concession contract to operate the subway lines 1 and 2 in the city of Rio de Janeiro through 2038, Moody's said.

MetroRio's credit quality is currently constrained by the sharp slowdown of economic activity in the municipality of Rio de Janeiro, the agency said.

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