Oi (OIBR3) leaves the “default” level after a note has been raised by S&P

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Oi (OIBR3) leaves the “default” level after a note has been raised by S&P
S&P raised Oi’s rating from default to CCC +, with a stable outlook

The rating agency Standard & Poor’s raised this Friday (16) the rating of Hi (OIBR3) from junk rate (default, in free translation in Portuguese) to CCC +, with a stable outlook.

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The US agency reported that the decision to withdraw the selective default note for the telecommunications company is the result of the amendment to Oi’s judicial recovery plan, approved by creditors in the first week of September and ratified by the Court on the last day. October 5th.

Now, according to S&P, the terms of the amendment allow the company to create isolated production units (UPIs) to separate assets and sell them in the coming quarters, including mobile assets and part of infrastructure assets (InfraCo).

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The rating agency said it expects Oi to be able to sell assets such as towers, data centers, furniture, infrastructure and TV assets, and to raise R $ 24 billion to R $ 27 billion in the coming years.

In addition, in the event of a so-called “liquidity event”, when, after payment by the National Development Bank (BNDES) and Oi mobile’s debentures, the resources resulting from the sale of assets exceed R $ 6.5 billion, the Oi will prepay debts with banks and export credit agencies (ECAs) with a 55% discount.

Oi’s leverage metrics should remain weak

S&P also evaluated that, in the short term, there is no liquidity pressure, however the leverage metrics should remain weak. In this sense, the company shows signs that it will be able to refinance or repay its debentures due in January 2022 and, as a result, will not face liquidity pressures as it will not have other significant maturities until 2025.

Despite this, the credit rating agency considered that the company’s cash flow leverage metrics Hi remain high in the coming years, with the adjusted gross debt ratio on earnings before interest, taxes, depreciation and amortization (Ebitda) significantly higher than the 6-fold level, while the free operating cash flow over debt is expected to stay close to 0% in the coming years.



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