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Rating Action:

Moody's America Latina downgrades the ratings of the Brazilian states of Parana, Maranhao, and the Municipality of Rio de Janeiro

 The document has been translated in other languages

12 Aug 2015

Sao Paulo, August 12, 2015 -- Moody's America Latina today changed the ratings of the Brazilian states of Parana and Maranhao. Moody´s also downgraded the ratings of the Municipality of Rio de Janeiro, as follows :

State of Parana. Rating downgraded to Ba1 (Global Scale, Local and Foreign Currency) from Baa3, and to Aa2.br (National Scale, Local and Foreign Currency) from Aa1.br, with a negative outlook

State of Maranhao. Rating downgraded to Ba2 (Global Scale, Local and Foreign Currency) from Ba1, and to Aa3.br (National Scale, Local Currency) from Aa2.br with a stable outlook, and

Rio de Janeiro, City of. Rating downgraded to Baa3 (Global Scale, Local and Foreign Currency) from Baa2, and affirmed to Aaa.br (National Scale, Local Currency) with a stable outlook

Today's action follows Moody's August 11, 2015 rating action in which it downgraded Brazil's government bond rating to Baa3 from Baa2. In addition to downgrading Brazil's government bond rating, Moody's also downgraded its senior unsecured debt rating to Baa3 from Baa2, and the senior unsecured shelf rating to (P)Baa3 from (P)Baa2. The rating agency also changed Brazil's foreign currency country ceilings as part of this rating action. The foreign currency bond ceiling went to Baa2 from Baa1, while the foreign currency deposit ceiling went to Baa3 from Baa2. (For full details, please see "Moody's downgrades Brazil's rating to Baa3 from Baa2; outlook changed to stable" at link https://www.moodys.com/research/Moodys-downgrades-Brazils-rating-to-Baa3-from-Baa2-outlook-changed--PR_331594). Macroeconomic and institutional factors closely link the credit quality of state and municipal governments in Brazil to that of the federal government.

RATINGS RATIONALE

In Moody's view, the ongoing deterioration of Brazil's economy and of the sovereign's fiscal position have a direct impact on the operating environment of Brazilian states and municipalities. In addition, the fiscal position of Brazilian states and municipalities has weakened in 2014, resulting from lower tax revenues and increased expenditure rigidities. Moody's expects that the challenging macroeconomic environment will continue to exert pressure on the credit quality of Brazilian states and municipalities in the near future.

Moody's also notes that the assigned ratings are supported by a strong institutional framework and by the close oversight of Brazil's federal government on states and municipalities in the country. The agency continues to view Brazil's institutional framework as a credit positive for states and municipalities relative to international peers.

Moody's maintains the ratings of the state of Parana with a negative outlook to reflect the faster deterioration in the state's operating balance during 2014 compared to peers, as indicated by figures published by the National Treasury System evidencing a deficit of around 6% of operating revenues, compared to a 10% surplus in 2013. The negative outlook also reflects diminished confidence in the state's reporting given the material discrepancy in the level of personnel expenses reported in the state's public accounts in 2014 compared with those reported by the federal government.

WHAT COULD CHANGE THE RATING UP/DOWN

A sustained improvement in key financial metrics and/or an upgrade of Brazil's government bond rating could lead to upward pressures. Conversely, a downgrade of the government bond rating, and/or a deterioration in the key financial metrics of each of these states and municipality could exert downward pressure on their ratings.

Moody's also notes that a continued failure by the State of Parana to clearly disclose its financial condition could lead the agency to consider withdrawing the ratings for lack of information.

The principal methodology used in these ratings was Regional and Local Governments published in January 2013. Please see the Credit Policy page on www.moodys.com.br for a copy of this methodology.

Moody's National Scale Credit Ratings (NSRs) are intended as relative measures of creditworthiness among debt issues and issuers within a country, enabling market participants to better differentiate relative risks. NSRs differ from Moody's global scale credit ratings in that they are not globally comparable with the full universe of Moody's rated entities, but only with NSRs for other rated debt issues and issuers within the same country. NSRs are designated by a ".nn" country modifier signifying the relevant country, as in ".za" for South Africa. For further information on Moody's approach to national scale credit ratings, please refer to Moody's Credit rating Methodology published in June 2014 entitled "Mapping Moody's National Scale Ratings to Global Scale Ratings".

REGULATORY DISCLOSURES

Information sources used to prepare the rating are the following: parties involved in the ratings, public information, and confidential and proprietary Moody's information.

Moody's considers the quality of information available on the rated entity, obligation or credit satisfactory for the purposes of issuing a rating.

Moody's adopts all necessary measures so that the information it uses in assigning a rating is of sufficient quality and from sources Moody's considers to be reliable including, when appropriate, independent third-party sources. However, Moody's is not an auditor and cannot in every instance independently verify or validate information received in the rating process.

The rating has been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.

Please see the ratings disclosure page on www.moodys.com.br for general disclosure on potential conflicts of interests.

Moody's America Latina Ltda. may have provided Other Permissible Service(s) to the rated entity or its related third parties within the 12 months preceding the credit rating action. Please see the special report "Services provided to entities rated by Moody's America Latina Ltda." on our website www.moodys.com.br for further information.

Entities rated by Moody's America Latina Ltda. (and the rated entities' related parties) may also receive products/services provided by parties related to Moody's America Latina Ltda. engaging in credit ratings activities. Please go to www.moodys.com.br for a list of entities receiving products/services from these related entities and the products/services received. This list is updated on a quarterly basis.

The date of the last Credit Rating Action for City of Rio de Janeiro was 27/January/2015.

The date of the last Credit Rating Action for State of Maranhao was 16/September/2014.

The date of the last Credit Rating Action for State of Parana was 16/September/2014.

Moody's ratings are constantly monitored, unless designated as point-in-time ratings in the initial press release. All Moody's ratings are reviewed at least once during every 12-month period.

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.br.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this rating action, and whose ratings may change as a result of this rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Please see ratings tab on the issuer/entity page on www.moodys.com.br for the last rating action and the rating history. The date on which some ratings were first released goes back to a time before Moody's ratings were fully digitized and accurate data may not be available. Consequently, Moody's provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com.br for further information.

Please see Moody's Rating Symbols and Definitions on the Rating Process page on www.moodys.com.br for further information on the meaning of each rating category and the definition of default and recovery.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Please see www.moodys.com.br for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com.br for additional regulatory disclosures for each credit rating.

Paco Debonnaire
Analyst
Corporate Finance Group
Moody's America Latina Ltda.
Avenida Nacoes Unidas, 12.551
16th Floor, Room 1601
Sao Paulo, SP 04578-903
Brazil
JOURNALISTS: 800-891-2518
SUBSCRIBERS: 55-11-3043-7300

David Rubinoff
MD - Sub-Sovereigns
Financial Institutions Group
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Releasing Office:
Moody's America Latina Ltda.
Avenida Nacoes Unidas, 12.551
16th Floor, Room 1601
Sao Paulo, SP 04578-903
Brazil
JOURNALISTS: 800-891-2518
SUBSCRIBERS: 55-11-3043-7300

Moody's America Latina downgrades the ratings of the Brazilian states of Parana, Maranhao, and the Municipality of Rio de Janeiro
No Related Data.
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