REFILE-UPDATE 1-Petrobras results lift Brazilian bonds
(Refiles to add more codes)
By Paul Kilby
NEW YORK, April 23 (IFR) - Brazil's Petrobras has eliminated a looming threat of a full rating downgrade to junk by releasing its audited results and cleared the way for this year's first bond issues out of the country.
Brazilian corporate bonds were on a tear Thursday morning after oil company Petrobras avoided a covenant breach with the late Wednesday publication of its long-awaited audited results for 2014.
By satisfying covenant deadlines for reporting financials, Petrobras has avoided a debt acceleration that may have resulted in government intervention - a move that in itself could have impacted Brazil's credit standing.
"The avoidance of a technical default is seen as positive in itself as that has avoided stress for the sovereign," said an investor involved with the credit.
Petrobras's curve tightened by up to 50bp this morning with the 2024s being quoted at 410bp, while Brazil 2025s jumped to 101.75, according to traders.
The company reported non-cash impairment cost of R$44.3bn (US$14.8bn) plus an additional R$6.19bn in corruption related losses, not to mention a jump in net leverage to 4.77x at end-2014.
"This will shift the focus to how they will right size the ship and keep leverage within a reasonable level," said Jack Deino, head of emerging market portfolio management and senior portfolio manager at Invesco. Continuación...