Research Update: State of Minas Gerais Downgraded To 'CCC-' From 'B-' On Higher Liquidity Pressures; Outlook Negative

The Brazilian state of Minas Gerais will be facing around R$3.6 billion in debt service costs in the next 12 months on debt it owes to commercial, public banks and multilateral lending agencies. The state's deep financial stress currently makes it vulnerable and dependent upon favorable business, financial, and economic conditions to meet its financial commitments. We now detect greater uncertainties over Minas Gerais' ability to service its debt payments coming due within the next six months. We're lowering our global scale rating on the state to 'CCC-' from 'B-' and our national scale rating to 'brCCC-' from 'brBBB-' given we believe a default, distressed exchange, or redemption appears to be inevitable within six months. The negative outlook reflects the

...+ The Brazilian state of Minas Gerais will be facing around R$3.6 billion in debt service costs in the next 12 months on debt it owes to commercial, public banks and multilateral lending agencies. + The state's deep financial stress currently makes it vulnerable and dependent upon favorable business, financial, and economic conditions to meet its financial commitments. We now detect greater uncertainties over Minas Gerais' ability to service its debt payments coming due within the next six months. + We're lowering our global scale rating on the state to '###-' from 'B-' and our national scale rating to 'brCCC-' from 'brBBB-' given we believe a default, distressed exchange, or redemption appears to be inevitable within six months. + The negative outlook reflects the likelihood of a further downgrade based on Minas Gerais' very weak finances and increasing likelihood of delayed debt service payments in the next six months....

Research Update