Sao Paulo, November 28, 2012 -- Moody's América Latina (Moody's) has downgraded Viver Incorporadora e Construtora S.A. (Viver)'s corporate family rating to B2 from B1 on the global scale and to Ba2.br from Baa2.br on the Brazilian national scale. At the same time, Moody's downgraded Viver's BRL300 million senior secured debentures due in 2016 to B2 from B1 and to Ba2.br from Baa2.br. The outlook for all ratings remains negative.

Ratings downgraded:

Viver Incorporadora e Construtora S.A. (Viver)

- Corporate Family Rating: to B2 from B1 (global scale); to Ba2.br from Baa2.br (national scale);

- BRL 300 million 5-year senior secured debentures: to B2 from B1 (global scale); to Ba2.br from Baa2.br (national scale);

- Outlook: negative.

Please see ratings tab on the issuer/entity page on moodys.com for information on Global Scale Rating.

RATINGS RATIONALE

Viver's ratings downgrade to B2 follows Moody's rating action published on July 10, 2012, when we changed the ratings outlook to negative from stable. The current rating action was triggered by a further deterioration on the company's credit metrics and liquidity position. Despite the company's announced turnaround plan including divestitures of non-core assets and capitalization from the shareholders, Moody's believes there is low likelihood that operating performance and credit metrics will materially recover before 2014. Still, the negative outlook reflects the company's significant challenges to improve operating profitability and deleverage its balance sheet over the next 12-18 months.

Viver's B2 rating reflects its strong brand name in the homebuilding industry and the change of control to Paladin Prime Residential Investors (Brazil), LLC (Paladin) at the end of 2008, which improved the company's corporate governance standards. Viver's relatively small size when compared to its international and local peers constrains the rating, as does its geographic concentration in the state of São Paulo and exposure to the low income segment. Furthermore, the ratings consider Viver's high leverage, low availability of unencumbered assets and execution risks for its land bank strategy.

During the last twelve months, Viver experienced cost overruns, contract cancellations, and construction delays, which caused revenue adjustments of BRL154 million in the 3Q12 and BRL117 million in 4Q11. These adjustments have materially impacted Viver's gross margin, bringing it down to -5.5% in LTM3Q12 from 25.5% in 2011 and 37.2% in 2010. While most of the 2012 and 2013 deliveries are low-margin projects launched up to 2009, the potential to recover margin before 2014 is rather limited.

Additionally, the company has been facing difficulties to complete the credit transfers from clients to commercial banks within a reasonable timeframe. The company is receiving funds back from banks in 10 months on average, a much longer period than the 90 days that we consider adequate. Like most Brazilian homebuilders, Viver depends on Caixa Economica Federal (CEF) or other commercial banks to complete this process and also on the homebuyer's credit quality at the end of the construction cycle, as such the company's shifting focus to the lower income segments in recent years is a rating constraint.

As result of the weak operating performance, the company has not been able to deleverage its balance sheet while the liquidity position deteriorated. Viver's leverage ratio as measured by Total Adjusted Debt to Book Capitalization reached of 68.8% in the 3Q12 up from 64% in FYE2011. Viver is currently scaling back new launches in order to reduce cash burn and further working capital pressures. We expect the company to wait until the recovery in sales velocity and the bulk of credit transfers to cash in before announcing the construction of new units. As a result, operating cash generation should improve during 2013, but at a slower pace than previous expected.

At the end of September 2012, the company had BRL259 million of cash and cash equivalents on balance sheet representing 43% of its short term maturities of BRL605 million (vs. 49% FYE 2011). Despite the small proportion of cash availability, around 62% of the debt coming due during the next twelve months is linked to projects that will be repaid as soon as mortgage transfers are completed. Viver has about BRL473 million in receivables from finished units in the transferring process that will generate cash to repay its project related loans over the next 12 months. Additionally, the company has BRL225 million undrawn committed facilities under the Sistema Financeiro de Habitação (SFH) to support its ongoing project commitments.

The company has announced its intention to divestiture non strategic assets. At the end of September 2012, Viver reported BRL945 million book value in landbank, which we estimate that 40% could be used to generate additional cash over the next two years. The company also concluded on November 6, 2012, a capital increase of BRL50 million, subscribed mainly by its four largest shareholders. Although insufficient to drive a material leverage reduction in the short term, we see this equity increase as a sign of support from the shareholders.

Outlook stabilization would require material improvements on cash-flow based credit metrics through reduced working capital requirements and significant leverage reduction. Mortgage availability at an earlier point in the construction cycle, which is more common in the lower income and middle-income segments in which the company is increasing its presence, are an important factor in Viver's ability to reduce its sizable investments in working capital. Quantitatively, the outlook stabilization could be triggered by sustainable positive cash flow from operations, Total Debt/Capitalization reduced to below 60% and interest coverage (EBIT / Interest) increased to above 2.0 times on a sustainable basis.

Viver's ratings could be further downgrade if Total Debt to Capitalization ratio remains above 65% over the next two quarters or if the company were to face significant deterioration in the quality of its receivables, especially in a more adverse macro-economic scenario. A downgrade could also be triggered by a further deterioration in Viver's liquidity profile due to a reduction in the availability and timeliness of disbursements from SFH credit lines that the company has actually available with CEF and other commercial banks.

The principal methodology used in rating the company was the Global Homebuilding Industry Methodology published in March 2009. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

Moody's National Scale Ratings (NSRs) are intended as relative measures of creditworthiness among debt issues and issuers within a country, enabling market participants to better differentiate relative risks. NSRs differ from Moody's global scale ratings in that they are not globally comparable with the full universe of Moody's rated entities, but only with NSRs for other rated debt issues and issuers within the same country. N SRs are designated by a ".nn" country modifier signifying the relevant country, as in ".br" for Brazil. For further information on Moody's approach to national scale ratings, please refer to Moody's Rating Methodology published in March 2011 entitled "Mapping Moody's National Scale Ratings to Global Scale Ratings".

Headquartered in Sao Paulo, Brazil, and founded in 1992, Viver is an integrated homebuilder historically focused in high-rise construction for the middle and mid-high income families. Viver has a track record of operations having delivered more than 15,000 units since 1995. Concentrated in the southeast region, mainly in São Paulo, Viver has changed its main focus towards the middle and low income segments. The company is also involved in commercial, tourism and land development segments spread across 17 states targeting all income brackets. Viver reported net revenues of BRL479 million during the last twelve months ended in September 2012.

REGULATORY DISCLOSURES

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Cristiane SpercelAsst Vice President - Analyst Corporate Finance Group Moody's America Latina Ltda. Avenida Nacoes Unidas, 12.551 16th Floor, Room 1601Sao Paulo, SP 04578-903 Brazil JOURNALISTS: 800-891-2518 SUBSCRIBERS: 55-11-3043-7300Brian Oak MD - Corporate Finance Corporate Finance Group JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653 Releasing Office: Moody's America Latina Ltda. Avenida Nacoes Unidas, 12.551 16th Floor, Room 1601Sao Paulo, SP 04578-903 Brazil JOURNALISTS: 800-891-2518 SUBSCRIBERS: 55-11-3043-7300(C) 2012 Moody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

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