Investing.com -- S&P Global Ratings has downgraded the credit ratings of Brazilian telecom operator, Oi S.A., to ’SD’ from ’ CCC (WA: CCCP )’ on the global scale and ’brB’ on the Brazil national scale. This comes after the company’s recent announcement that holders of its US$505 million priority notes due 2027 and its 13th private debentures agreed to capitalize the total interest accrued on these instruments, which were set to mature on March 31, 2025.

In addition to the issuer credit ratings, S&P also lowered the issue rating on Oi’s US$505 million notes due 2027 to ’D’ from ’CCC+’. Concurrently, the issue rating on the senior secured notes due 2026 was reduced to ’CCC-’ from ’CCC+’. The recovery rating on these notes remains at ’3’, indicating S&P’s belief that Oi will keep up with its payments and that debtholders would see a meaningful recovery, around 60%, in a new distress scenario.

The downgrade was triggered by Oi’s failure to meet interest payments on part of its debt due on March 31, 2025, despite receiving a waiver from creditors. The company negotiated this waiver with the creditors of its 2027 priority notes and its 13th debentures, allowing it to defer the interest payments due on that date.

Looking ahead, S&P anticipates that Oi will continue to generate negative EBITDA in 2025 and very low EBITDA in 2026. The company is expected to require additional waivers for the upcoming quarterly interest payments on the same debt instruments. However, it is believed that Oi will remain current on its other debt obligations, including the 2026 notes.

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