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Rating Action:

Moody's announces impact on Portuguese corporate government-related issuers following Portugal's sovereign downgrade

16 Feb 2012

Milan, February 16, 2012 -- Moody's Investors Service has today downgraded by one notch the ratings of two Portuguese government-related issuers (GRIs): Comboios de Portugal EPE (CP) and Parpublica-Participacoes Publicas (SGPS), SA (Parpública). Concurrently, Moody's has affirmed the B1 ratings of Radio e Televisao de Portugal S.A. (RTP). The outlook on all the affected ratings is negative.

Today's rating actions affected the following entities:

- CP: Corporate family rating (CFR) and probability of default rating (PDR) downgraded to B3 from B2

- Parpública: CFR, PDR as well as senior unsecured bonds downgraded to B2 from B1

- RTP: CFR, PDR and senior unsecured ratings affirmed at B1

All of the above GRIs have a very strong element of government support incorporated into their ratings in accordance with Moody's rating methodology for such entities.

These actions follow Moody's recent decision to downgrade the rating of the government of the Republic of Portugal (RoP) to Ba3 with a negative outlook from Ba2. For full details, please refer to the webpage containing all of Moody's related announcements http://www.moodys.com/newsandevents/topics/euro-area-sovereign-crisis-affected-credits/-/007022/-/-/0/0/-/0/-/-/en/global/rr

RATINGS RATIONALE

- DOWNGRADE OF CP

Moody's decision to downgrade CP follows the rating agency's decision to downgrade the rating of the government of RoP to Ba3 with a negative outlook from Ba2, given the strong government support that Moody's incorporates into its ratings for CP. The rating agency had previously stated that a downgrade of the sovereign rating would likely result in a downward movement of CP's ratings.

CP has, to date, been able to roll over their short-term debt maturities and has benefited from support from the government, which Moody's expects to continue. However, this entity has some of the largest debt maturities due over the next 12 months, which renders it vulnerable to any negative developments given its very weak standalone profile. Nevertheless, today's downgrade of CP's ratings was limited to one notch because Moody's expects banks to extend CP's debt maturities, which are likely to be supplemented where necessary with tangible financial support from the government.

In accordance with Moody's GRI rating methodology, the B3 rating of CP reflects the combination of the following inputs: (i) a baseline credit assessment (BCA), which is a measure of the company's standalone financial strength without the assumed benefit of government support, of 20, (equivalent to Ca on Moody's global ratings scale); (ii) the Ba3 local currency rating of RoP; (iii) high support; and (iv) very high dependence.

The outlook on CP's rating is negative, reflecting the negative outlook on the government of RoP's rating. Any further downgrades of the government of RoP's rating would likely result in a downwards movement in CP's rating. Furthermore, any evidence that the provision of financial support from RoP would not be forthcoming if required, would result in a downgrade of the rating of CP. An upgrade of RoP's rating could exert upward pressure on CP's rating, although Moody's does not currently expect this given the negative outlook on the government of RoP's rating.

- DOWNGRADE OF PARPUBLICA

As with CP, Moody's decision to downgrade Parpública follows the rating agency's decision to downgrade the rating of the government of RoP to Ba3 with a negative outlook from Ba2. The ratings agency had previously stated that a downgrade of the sovereign rating would likely result in a downgrade of Parpública's ratings.

Parpública's B2 rating reflects its nature as the government's industrial holding arm in strategic companies and its role in serving the government's political objectives. The B2 rating is two notches below the sovereign bond rating, which reflects Moody's determination of the rating through credit substitution rather than through a more granular analysis. The use of credit substitution in turn reflects Parpública's ownership structure (100% state owned) together with the very significant financial, strategic and management control exerted by the government (which, for example, appoints members of the management board and audit committee). The rating also incorporates Parpública's lack of reliance on direct government funding, as well as the value of its equity holdings versus its debt. Some of these equity holdings, such as the stake in Energias de Portugal (EDP), were recently sold for EUR2.7 billion, and others are in the process of being sold as part of the government's need to raise cash. The assets sold will most likely be replaced with other government-owned assets. Moody´s expects the government to decide soon how much of the cash proceeds raised will be retained by Parpública for it to fund its future cash needs and how much will be up-streamed to the government.

The outlook on the rating is negative, reflecting the negative outlook on the government of RoP's rating. A further downgrade of the rating of the government of RoP would likely result in a downgrade of the rating of Parpública. Furthermore, any evidence that the provision of financial support from RoP would not be forthcoming if needed, would result in a downgrade. In addition, negative pressure could develop in the event of a weakening of Parpública's liquidity profile. In line with the recent downgrade and negative outlook, Moody's does not expect positive pressure to be exerted on the ratings in the short term. However, a significant although unlikely upgrade in the rating of the government of RoP could result in an upgrade of Parpública's ratings.

- AFFIRMATION OF RTP

Moody's decision to affirm RTP's ratings reflects Moody's assessment of the company's financial profile following recent debt repayments as well as clear expressions of support from the government. As a result, the rating gap with the sovereign has been reduced to one notch from two. Moody's notes that the Portuguese government has included in the 2012 State Budget the amounts outstanding under RTP's bank credit facility. This means that the company's debt balance will be reduced by the same amount, thus improving its financial profile. Moody's also notes that the European Commission (EC) has confirmed that this repayment of RTP's debt by the government would not constitute state aid. In Moody's view, the inclusion of this debt repayment in the State Budget is a demonstration of the high support assumption embedded in RTP's B1 rating. These positive considerations are tempered by the potential privatization of RTP or one of its two channels, which, if implemented, could lead to the loss of RTP's GRI status and the removal of its rating uplift based on current government support.

RTP's B1 rating reflects the following combination of inputs: (i) a BCA of 17 (Caa1 equivalent); (ii) the Ba3 local currency rating of RoP; (iii) very high dependence; and (iv) high support. RTP's credit quality relies primarily on the credit strength of its 100% owner, the Portuguese government, given that RTP would be unviable with its current financial profile if it were to be considered a standalone entity. Despite RTP's weak standalone financial profile, the B1 rating nevertheless reflects the company's continued close links with the government of RoP and Moody's expectation that the government would step in with timely extraordinary financial support if required, despite the lack of an explicit guarantee.

The outlook on RTP's ratings is negative, reflecting the negative outlook on the government of RoP's rating. While Moody's does not consider it likely in the near term given the negative outlook on the ratings, a significant upgrade in the rating of the government of RoP could result in an upgrade of RTP. Moody's could consider upgrading RTP's senior unsecured bank facility rating to the sovereign rating level if the government were to provide an explicit guarantee or equivalent measure.

The trajectory of RTP's ratings in the future could be affected by any future downward moves in the rating of the government of RoP. A weakening in the company's liquidity profile could also exert downward pressure on the rating. Moreover, a partial sale of the government's shareholding in RTP or any indication of a change in the government of RoP's willingness/capacity to intervene in a timely manner to support RTP in the event of need, could cause further downward pressure on RTP's ratings bringing the entity closer to its standalone credit quality.

Please refer to the credit opinion page of each of the above companies on www.moodys.com for further details.

PRINCIPAL METHODOLOGIES

The principal methodology used in rating CP was the Global Passenger Railway Companies Industry Methodology published in December 2008. Other methodologies used include Loss Given Default for Speculative-Grade Non-Financial Companies in the U.S., Canada and EMEA published in June 2009 and the Government-Related Issuers Methodology Update published in July 2010. Please see the Credit Policy page on www.moodys.com for a copy of these methodologies.

The principal methodology used in rating Parpública was the Government-Related Issuers: Methodology Update published in July 2010. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

The principal methodology used in rating RTP was the Global Broadcast Industry Methodology published in June 2008. Other methodologies used include Loss Given Default for Speculative-Grade Non-Financial Companies in the U.S., Canada and EMEA published in June 2009 and the Government-Related Issuers Methodology Update published in July 2010. Please see the Credit Policy page on www.moodys.com for a copy of these methodologies.

CP is the main railway operator in Portugal, controlling 90% of the passenger market. The company is 100% owned by the Portuguese government though the Ministry of Finance and in fiscal year 2010 reported revenues of EUR239 million.

Parpública is a state-owned industrial holding company domiciled in Lisbon, Portugal. Parpública's main role is the management of equity stakes held by the Portuguese state in Portuguese companies of public or strategic interest in terms of the restructuring of the corresponding sector. The Ministry of Finance acts on behalf of the state in its capacity as sole shareholder of Parpública. As of 31 December 2011, the company's largest holdings are in GALP Energia, Redes Energeticas Nacionais (REN), TAP airline and ANA.

RTP is a corporation, duly incorporated under domestic law, and therefore subject to standard Portuguese commercial law. RTP is 100% owned by the Portuguese state through the General Directorate of Treasury and Finance, and has operated Portugal's public service broadcasting channels under a concession from the government since 1996.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides relevant 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 relevant 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 relevant 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.

The ratings have been disclosed to the rated entities or its designated agent(s) and issued with no amendment resulting from that disclosure.

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

Moody's considers the quality of information available on the rated entities, obligations or credits satisfactory for the purposes of issuing these ratings.

Moody's adopts all necessary measures so that the information it uses in assigning the ratings 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.

Moody's Investors Service may have provided Ancillary or Other Permissible Service(s) to the rated entities or their related third parties within the two years preceding the credit rating action. Please see the special report "Ancillary or other permissible services provided to entities rated by MIS's EU credit rating agencies" on the ratings disclosure page on our website www.moodys.com for further information.

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

Please see the ratings disclosure page on www.moodys.com for information on (A) MCO's major shareholders (above 5%) and for (B) further information regarding certain affiliations that may exist between directors of MCO and rated entities as well as (C) the names of entities that hold ratings from MIS that have also publicly reported to the SEC an ownership interest in MCO of more than 5%. A member of the board of directors of this rated entity may also be a member of the board of directors of a shareholder of Moody's Corporation; however, Moody's has not independently verified this matter.

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

Please see for each issuer the ratings tab on the issuer/entity page on www.moodys.com 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 for further information.

The below contact information is provided for information purposes only. Please see the issuer page on www.moodys.com for Moody's regulatory disclosure of the name of the lead analyst and the office that has issued the credit rating.

The person approving the credit rating for each issuer is as follows:

Comboios de Portugal EPE (CP) is Eric de Bodard, MD -- Corporate Finance, JOURNALISTS: 44 20 7772 5456 SUBSCRIBERS: 44 20 7772 5454.

Parpublica-Participacoes Publicas (SGPS), SA (Parpública) and Radio e Televisao de Portugal S.A. (RTP) is Paloma San Valentin, MD -- Corporate Finance, JOURNALISTS: 44 20 7772 5456 SUBSCRIBERS: 44 20 7772 5454.

The relevant Releasing Office for each rating is identified under the Debt/Tranche List section on the Ratings tab of each issuer/entity page on moodys.com

Marco Vetulli
VP - Senior Credit Officer
Corporate Finance Group
Moody's Italia S.r.l
Corso di Porta Romana 68
Milan 20122
Italy
Telephone:+39-02-9148-1100

Eric de Bodard
MD - Corporate Finance
Corporate Finance Group
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Releasing Office:
Moody's Italia S.r.l
Corso di Porta Romana 68
Milan 20122
Italy
Telephone:+39-02-9148-1100

Moody's announces impact on Portuguese corporate government-related issuers following Portugal's sovereign downgrade
No Related Data.
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