Fitch Ratings on March 16 downgraded Cielo SA's long-term foreign and local currency issuer default ratings to BB+ from BBB-, while revising the outlook to stable from negative.
The downgrade was due to the similar negative ratings action on Brazil's sovereign ratings. This resulted in the downgrade of several major card-issuing banks, which are the counterparty risk for a substantial portion of Cielo's Visa-related credit and debit transactions.
However, Fitch noted that the risk associated with Visa transactions is mitigated by the licensing agreement with Mastercard, which guarantees the settlement of all transactions. The risk is also reduced by the fact that more than 95% of the volume of transactions is concentrated in banks rated BB- and above by the rating agency.
