UPDATE 2-Moody's strips Brazil's Petrobras of investment grade rating

martes 24 de febrero de 2015 21:31 GYT
 

(Adds quotes from Moody's statement)

By Stephen Eisenhammer

RIO DE JANEIRO Feb 24 (Reuters) - Moody's Investors Service stripped Brazil's state-run oil company Petrobras of its investment grade rating on Tuesday and kept the firm on review for further downgrade, citing concerns over an ongoing corruption scandal and liquidity pressures.

The ratings agency said in a statement it was downgrading Petroleo Brasileiro SA, as the oil company is formally known, to Ba2 from Baa3, on the grounds it would struggle to meaningfully reduce its "very high debt burden" in the next several years.

Petrobras said in a statement that it had no contractual terms forcing it to repurchase any of its bonds from investors in the event of if it losing its investment grade.

The downgrade is a red flag for further bad news for Brazil's most important company, since most large institutional investors are only able to put money into investment grade securities. It marks a dramatic fall for what was still recently one of the most exciting stocks in the oil industry.

The negative outlook suggests a growing corruption scandal will likely boost borrowing costs. This comes as falling oil prices have already cut the cash needed to pay rising debt and to finance new production from vast offshore discoveries.

The company is under police investigation over an alleged bribery and money laundering scheme, in which construction companies and their executives conspired with Petrobras executives to overcharge for contracts. Much of the excess was then kicked back to Petrobras executives, politicians and political parties, prosecutors say.

Moody's said it had "ongoing concerns about corporate governance and the need to sustainably improve internal controls" at the company as well as adding that challenges related to the corruption investigations "may hinder efforts to improve operations."

Petrobras remains on review for a possible further downgrade due to potential issues linked to the publishing of financial results, Moody's said. The company delayed the publishing of its third quarter earnings in November and then posted unaudited results at the end of January, but without taking a writedown on assets over-valued by alleged corruption.

Moody's said the company needs to publish audited annual statements by April 30 and that "extended delay carries the risk that creditors could take actions that lead to a declaration of technical default." (Additional reporting by Jeb Blount and Guillermo Parra-Bernal; Editing by Chris Reese and Ken Wills)