OREANDA-NEWS. Fitch Ratings maintains the ratings assigned to the 2014 series issued by Rio Oil Finance Trust on Rating Watch Negative. A full list of ratings follows at the end of this press release.

The ratings address timely payment of interest and principal on a quarterly basis.

The Negative Watch reflects the ongoing analysis related to Petrobras' recently announced CAPEX plans and the potential impact on production levels, which in turn may affect expected royalty flows that support the transaction.

The ratings on all series are ultimately supported by the structural features in place.

The issuances are backed by the royalty flows owed by oil concessionaires, predominantly operated by Petroleo Brasileiro S.A. (Petrobras), to the government of the state of Rio de Janeiro (RJS), who assigned 100% of the flows to RioPrevidencia (RP), the state's pension fund.

KEY RATING DRIVERS

Impact of Petrobras' New Investment Plan
On June 29, 2015, Petrobras released its new investment plan, which articulates a 37% investment reduction that translates to a 33% decrease in expected production by 2020. While Fitch does not expect this to have a large impact on short-term production levels, the agency continues to assess the magnitude of this impact on the specific royalties generated out of the State of Rio.

Amortization Schedule Mitigates Impact of Expected Decline in Production Levels

The transaction is most sensitive to cashflow declines in 2016 as large amortization payments are due during this period. The transaction has some exposure to longer-term production levels, so production significantly below Fitch's expectations may have a negative impact on the credit quality of the transaction.

Oil Price Decline Partially Offset by Production and Exchange Rate

The impact of low oil prices on the transaction has been partially offset by production levels slightly higher than expected during 2015. Additionally, the devaluation of the Brazilian Real continues to benefit debt service coverage ratio (DSCR) levels, as a portion of the liabilities are in Brazilian Reais.

Petrobras' Rating Remains on Outlook Negative
Petrobras' rating acts as the implied cap for the transaction as the energy company is the main source of cash flows backing the transaction. On April 24, 2015 the company's local and foreign currency (LC/FC) Issuer Default Ratings (IDRs) were affirmed at 'BBB-' and 'AAA(bra)', but Fitch maintains a Negative Outlook on the company.

RATING SENSITIVITIES
The ratings are capped by the credit quality of Petrobras as the main obligor of the cash flows backing this transaction and by the sovereign and country ceiling rating of Brazil.

The transaction is exposed to price and volume risk related to oil production. Further declines in prices or production levels significantly below expectations may trigger downgrades.

Although the transaction rating is not directly linked to the originator's rating, in case of considerable downgrade of the state's rating, the transaction rating may be impacted negatively.

Additionally, the ratings are sensitive to the rating of Banco do Brasil as a direct counterparty to the transaction.

DUE DILIGENCE USAGE
No third-party due diligence was provided to or reviewed by Fitch in relation to this rating action.

Fitch maintains the following ratings on Negative Watch:

--USD2 billion series 2014-1 notes: 'BBB-';
--BRL 2.4 billion series 2014-2 special indebtedness interests: 'AAA(bra)';
--USD1.1 billion series 2014-3 notes: 'BBB-'.

Contacts:
Primary Analyst
Mirian Abe
Director
+55-11-4504-2614
Fitch Ratings do Brasil Ltda.
Alameda Santos 700, 7o Andar
Sao Paulo - SP, 01418-100

Committee Chairperson
Greg Kabance
Managing Director
+1-312-368-2052

Media Relations: Alyssa Castelli, New York, Tel: +1 (212) 908 0540, Email: alyssa.castelli@fitchratings.com.

Additional information is available at www.fitchratings.com.

Sources of Information:
In addition to the sources of information identified in the master criteria, this action was additionally informed by information from RP and the bond administrator, Banco do Brasil.

Applicable Criteria
Counterparty Criteria for Structured Finance and Covered Bonds (pub. 14 May 2014)
Criteria for Rating Caps and Limitations in Global Structured Finance Transactions (pub. 28 May 2014)
Future Flow Securitization Rating Criteria (pub. 09 Jun 2014)
Global Structured Finance Rating Criteria (pub. 06 Jul 2015)

Additional Disclosures
Solicitation Status
Endorsement Policy
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