CORRECTED-Petrobras still faces default risk despite release, fund says

martes 10 de febrero de 2015 14:17 GYT

(Corrects Jan. 28 story to say analyst Karina Freitas is concerned about Petrobras debt levels, not that she is concerned the debt levels may break a bond covenant, paragraphs 10-11)

By Jeb Blount

RIO DE JANEIRO Jan 28 (Reuters) - Brazilian state-run oil company Petrobras still runs the risk of being declared in default on billions of dollars of debt even after releasing its delayed third-quarter earnings before a self-imposed deadline, a New York-based hedge fund said on Wednesday.

The results, which failed to include an expected charge against earnings related to a corruption scandal, may even add to the number of bond covenants, or legal promises to investors, that have been broken by the company, a senior executive at Aurelius Capital Management said.

In particular, Petrobras' comment in "Note 2" of its unaudited third-quarter results saying that they do not fully meet the International Accounting Standards Board's (IASB) international reporting standards shows non-compliance, said Mark Brodsky, Aurelius' chairman.

The Petrobras note to its results says some of its results are in compliance with the IASB's IAS-34 rule but some, including those related to assets whose value may have been overvalued by corruption, are not.

"Despite its recent assurances, Petrobras remains in default on its New York-law bonds," Brodsky said in a statement sent to Reuters. "Those bonds require Petrobras to issue financial statements that comply with IASB rules, but Note 2 to the new financial statements admits that they do not."

Petrobras did not immediately respond to a request for comment on Aurelius' comments. Aurelius, an investment firm with a focus on distressed assets, asked investors in December to put Petrobras into default as "a precautionary step," according to a Dec. 29 letter.

If investors holding at least 25 percent of a Petrobras bond with this covenant agree with Aurelius, this could lead to a default declaration, raising the risk that Petrobras may have repay $54 billion of bonds governed by New York law before maturity. If one bond is declared in default, all bonds could follow.   Continuación...