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TEXT-Fitch: Itau's increased participation in Redecard is ratings neutral
September 26, 2012 / 6:56 PM / 5 years ago

TEXT-Fitch: Itau's increased participation in Redecard is ratings neutral

Sept 26 () - The conclusion of Redecard S.A.'s (Redecard) public tender
offer announced on Sept. 24, 2012 is neutral to Redecard's ratings, as the
company's classification already benefits from the support and strength of its
controlling shareholder, Itau Unibanco Holding S.A. (Itau), according
to Fitch Ratings. The purpose of the public tender offer was the cancelation of
the company's registration as a publicly held company.

Following the transaction, Itau controls 94.4% of Redecard's equity stock,
compared to 50% before the public tender offer. Itau may acquire the remaining
shares by Dec. 24, 2012. The transaction amounted to BRL10.5 billion for 44.4%
of the shares, corresponding to a price per share of BRL35.00, to be paid by
Itau. Itau is rated 'AAA(bra)' on the national scale with a local currency
Issuer Default Rating (IDR) of 'A-' and a foreign currency IDR of 'BBB+'.

Fitch believes that Itau's increased participation should contribute to higher
integration and synergies between Redecard and Itau. Redecard's competitiveness
is expected to increase, as the company should benefit from Itau's strong client
base. Operating margins, however, could come under pressure over the
short-to-medium term as competition in the payment card industry may intensify.

Redecard's ratings reflect the strength and stability of its business model
supported by the predictability of its revenue stream from a diversified base of
affiliated merchants. The company has a solid capital structure and liquidity,
which benefits from its strong presence in the Brazilian card payment industry
and its business position and its capacity to generate strong cash flow in its
business. Redecard's ratings also incorporate the low counterparty risks
associated with the Brazilian banking system, as more than 95% of credit and
debit transactions are settled with investment grade banks.

The Brazilian card payment industry's high barriers to entry support Redecard's
strong market position, which is viewed as sustainable in the medium term,
despite the highly competitive environment. Redecard's main challenges are to
consistently add volume to credit and debit transactions, preserve its market
share and net merchant discount rate (MDR) in a more competitive environment.

Fitch currently rates Redecard as follows:

-- Foreign currency IDR at 'BBB+';
-- Local currency IDR at 'BBB+';
-- Long-term national scale rating at 'AAA(bra)';
-- National scale rating 'AAA(bra)' to its first debentures issuance, in the
amount of BRL1.5 billion, due in 2017.

The Rating Outlook for the corporate ratings is Stable.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research:
--'Corporate Rating Methodology' (Aug. 8, 2012);
--'National Ratings - Methodology Update' (Jan. 19, 2011).

Applicable Criteria and Related Research:
Corporate Rating Methodology
National Ratings Criteria

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