Press release – S&P Lowers Ratings On OOG, Places Rtgs On Watch Neg

NEW YORK (Standard & Poor's) Oct. 2, 2015--Standard & Poor's Ratings Services 
said today it lowered its corporate credit and issue-level ratings on 
Odebrecht Oleo e Gas S.A. (OOG) to 'B' from 'BB-'. At the same time, we placed 
the ratings on CreditWatch with negative implications. In addition, we lowered 
the company's SACP to 'b-' from 'b+'. 
 
The downgrade reflects our expectation for weaker credit metrics in the next 
three years due to lower-than-expected dividends from its operating 
subsidiaries, after Petrobras terminated the charter and service agreements 
with the ODN Tay IV drilling rig. Even though OOG is already exploring 
replacement charter agreements, under our base-case scenario, we do not expect 
top-level distributions from the subsidiaries involved in the OODFL project 
because of the distribution limitations of this transaction. As a result, we 
expect top-level distributions to the parent to decline to around $75 million 
in 2016 and 2017, from the previously projected $115 million in 2015, leading 
to negative POCF during the next three years, and credit metrics commensurate 
with a 'b-' SACP. 
 
The negative CreditWatch listing reflects the risk of a cross acceleration of 
OOG's notes if there is an acceleration of the OODFL transaction. Following 
the termination event of the charter and services agreements of the vessel ODN 
Tay IV, OOG has 90 days to replace the contracts with similar conditions. The 
failure to provide such a remedy, according to the terms of the OODFL notes, 
may cause a non-automatic event of default, according to the definition of the 
OODFL notes. Therefore, at this point, there is a non-automatic risk that the 
perpetual notes will be accelerated, if there is a cross acceleration of the 
OODFL notes. On the other hand, if the bondholders of OODFL waive the 
execution of this clause, there would be no impact on OOG's perpetual notes. 
We expect to have a better understanding of the next steps, and therefore 
resolve the CreditWatch listing, within the next 90 days. 
 
For our most recent recovery analysis on OOG, see "Odebrecht Oleo e Gas S.A. 
'BB-' Ratings Affirmed, Outlook Remains Stable," published July 1, 2015 on 
RatingsDirect.