Petrobras spreads blow out after Moody's downgrade
By Davide Scigliuzzo
NEW YORK, Feb 25 (IFR) - Brazilian state-run oil company Petrobras' international bonds widened by as much as 50bp early on Wednesday after Moody's stripped the company of its investment grade rating.
Citing increasing concerns about a corruption investigation and liquidity pressures that might result from delays in the release of audited financial statements, Moody's lowered its rating on Petrobras by two notches to Ba2 from Baa3.
By 09:00 EST, the Petrobras 2024s had come off slightly from their widest levels in the morning and were quoted at a spread of 575bp-565bp, or still 40bp wider on the day.
The 2044s were spotted at 565bp-555bp, or about 30bp wider, according to a corporate bond trader in New York.
While the rating agency had warned at the beginning of February, that it could downgrade Petrobras to junk status within a month, Tuesday's announcement took many by surprise.
"The price action makes me think that maybe I am too negative, but I think this was unexpected and Moody's was pretty aggressive," said the trader. "The more important question is what it means for the sovereign."
Moody's still rates Brazil three notches above Petrobras at Baa2, while rival agencies have a smaller or no rating gap between the two entities.
Fitch rates Brazil Triple B, only one notch above Petrobras's Triple B minus, while Standard & Poor's rates both the company at the sovereign Triple B minus. Continuación...