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Rating Action:

Moody's places Globo's Baa2 ratings under review for downgrade

10 Dec 2015

New York, December 10, 2015 -- Moody's Investors Service has today placed Globo Comunicações e Participações S.A.'s Baa2 senior unsecured rated debt and issuer rating under review for downgrade. The rating action follows Moody's rating action on December 09, 2015 that placed Brazil's Baa3 government bond rating under review for downgrade.

Ratings placed under review for downgrade:

- Issuer Rating: Baa2 (global scale)

- USD 200M 5.307% Sr. Global Notes due 2022: Baa2 (global scale)

- USD 300M 4.875% Global Notes due 2022: Baa2 (global scale)

- USD 325M Global Bonds due 2025: Baa2 (global scale)

RATINGS RATIONALE

"The review of Globo's ratings was prompted by Moody's rating action on December 9, 2015 that placed Brazil's Baa3 government bond rating under review for downgrade", explained Moody's VP Senior Analyst, Marcos Schmidt.

"The review will focus on the result of Brazil's government bond rating review process, on Globo's correlation with the Brazilian economy, and its impacts on the company's operating performance, credit metrics, and foreign-exchange exposure ", added Schmidt.

As per Moody's methodology "How Sovereign Credit Quality Can Affect Other Ratings", published on 16 March, 2016, deterioration in sovereign credit quality can directly affect the credit standing of issuers domiciled within the country, but issuers with fundamentals that are much stronger than the sovereign could be rated above it on an exceptional basis.

Globo's ratings are mainly supported by its very strong credit metrics and liquidity, as well as its leading market position in the Brazilian TV broadcasting market with 37% of the overall average national audience share and 41% during prime time, in the last twelve months ended in September 2015. The rating also reflects Globo's demonstrated progress in diversifying away from advertising revenues into the higher margin content and programming segment that reached 31% of revenues in September 2015. Globo's high quality content with 92% of its prime time programming produced in-house is an additional credit positive.

Globo's ratings rank one-notch above Brazil's government bond rating, which is granted only on exceptional basis for issuers with fundamentals that are much stronger than the sovereign. In the case of Globo this is evidenced by its exceptionally strong credit metrics, ample liquidity and a foreign-exchange exposure that is managed through hedges and mitigated by revenues generated outside of Brazil that are sufficient to service its near-term debt servicing obligations. These factors outweigh Globo's close links with the Brazilian economy.

The main factors constraining Globo's ratings are Brazil's government bond rating at Baa3 (RUR-Down), the company's concentration of revenues in the cyclical Brazilian TV advertising market, with a degree of foreign exchange exposure, as well as the company's high fixed cost base, stemming from its high quality programming strategy, and competition that pressures its margins. The company's improved, but still evolving corporate governance and lack of independent board members are also factors constraining Globo's rating.

Headquartered in Rio de Janeiro and owned by the Marinho Family, Globo is Brazil's largest media group and leading broadcast TV network with BRL 15.8 billion (equivalent to USD 5.3 billion) in net revenues in the last 12 months ended in September 2015. Globo has other business activities including pay-TV production and programming, sound recording, magazine publishing, internet businesses engaged through its subsidiaries.

The principal methodology used in these ratings was Global Broadcast and Advertising Related Industries published in May 2012. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

REGULATORY DISCLOSURES

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.

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.

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 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 for additional regulatory disclosures for each credit rating.

Marcos Schmidt
Vice President - Senior 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

Marianna Waltz, CFA
MD - Corporate Finance
Corporate Finance Group
JOURNALISTS: 800-891-2518
SUBSCRIBERS: 55-11-3043-7300

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's places Globo's Baa2 ratings under review for downgrade
No Related Data.
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