Oi S.A. -- Moody's places Oi S.A.'s ratings under review for downgrade

New York, July 17, 2014 -- Moody's Investors Service placed the ratings of Oi S.A. ("Oi"), including its Baa3 global ratings, on review for possible downgrade. The ratings review was triggered by Oi's disclosure of a potential loss of up to EUR 900 million from commercial paper (CP) investments made by Portugal Telecom SGPS S.A. ("PT SGPS") which were contributed as part of Oi's capital increase in May of 2014. The loss will reduce the consolidated entity's liquidity and could substantially delay Oi's progress in reducing leverage. A full loss of the CP investment would effectively offset approximately one-third of the cash raised through Oi's recent R$8 billion capital increase. To compensate Oi's equity holders for the loss, PT SGPS will reduce its equity stake in the merged entity of PT and Oi by an amount approximately equal to the loss.

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