Fitch Maintains Brazilian Construction Companies on Rating Watch Negative

Fitch Ratings has maintained the ratings for the following issuers on Rating Watch Negative: Camargo Correa S.A. (CCSA), Construtora Andrade Gutierrez S.A. (CAG), Construtora Norberto Odebrecht S.A. (CNO) and Construtora Queiroz Galvao S.A. (CQG). The ratings associated with their financial vehicles' issuances also remain on Rating Watch Negative. A complete list of rating actions follows at the end of this press release.

KEY RATING DRIVERS

Key concerns regarding the aforementioned companies have not registered major developments since the last rating action on January 2015. They include: the ongoing nature of the Lava Jato investigation, which could lead to additional negative findings; decreasing and more expensive financing options for most companies in the sector; yet-to-be determined punitive measures; challenging conditions for receiving payments for completed projects and recognizing claims related to contract amendments; and the potential restructuring, suspension, or delays under existing contracts with Petroleo Brasileiro S.A. (Petrobras).

At the same time, there have been no evidences that CNO, CAG, CCSA and CQG's credit metrics have been materially affected by the scandal, although changes on this scenario may occur in the short term. Banks have become more diligent in dealing with Brazilian contractors, cost of capital increased, and the market environment is unfavorable to the government to implement the infrastructure agenda as most of the tier 1 and 2 engineering and construction (E&C) companies in Brazil are under investigation.

CNO, CAG, CCSA and CQG have been implementing a robust cash balance policy, which is positive during the current challenging operating scenario. This should partially cushion a potential negative impact on these companies' financial profile in the next quarters. The operations abroad are also likely to mitigate the expected slowdown within operation in Brazil.