Brazil-based telecommunications company Oi announced a memorandum of understanding for a proposed merger of Oi, Portugal Telecom, and Oi holding companies. The transaction will be funded through a capital increase in cash of R$7 billion to R$8 billion and a capital increase in kind of about R$6.1 billion from the contribution of Portugal Telecom's assets. We have placed the global scale 'BBB-' and national scale 'brAAA' ratings on Oi on CreditWatch with negative implications. The negative CreditWatch listing reflects the possibility of a downgrade, because based on our preliminary assessment, it should take longer for the combined entity to show the stronger credit protection measures that were supporting the stable outlook on Oi. On Oct. 2, 2013, Standard&Poor's
