Fitch lowers Brasil Telecom

Fitch Ratings said it downgraded Brasil Telecom SA's local-currency long-term issuer default rating and $200 million political risk insured notes due 2014 to BBB- from BBB and affirmed its national scale long-term rating and R$1.08 billion fifth issue of debentures at AA+(bra).

Brasil Telecom Participacoes SA's local-currency long-term issuer default rating was downgraded to BBB- from BBB and its national scale long-term rating was affirmed at AA+(bra).

The ratings were removed from Rating Watch negative, and the outlook is stable.

The rating actions follow the successful completion of the acquisition of a controlling stake in Brasil Telecom Participacoes by Telemar Norte Leste SA. Fitch said this will result in greater financial leverage assumed by Telemar in order to acquire the control of Brasil Telecom Participacoes as well as debt associated with the future tender offers of Brasil Telecom Participacoes and Brasil Telecom by Telemar.

The agency expects that, on a pro forma basis including Brasil Telecom and necessary funding, the total debt-to-EBITDA and net debt-to-EBITDA ratios of the combined entity should be 2.4 to 2.5 times and 1.8 to 2.0 times, respectively.

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