February 2, 2017 / 7:35 PM / a year ago

Fitch Latam Spotlight: Petrobras, Not Out of the Woods Yet

(The following statement was released by the rating agency) Link to Fitch Ratings' Report: What Investors Want to Know: Petrobras (Not Out of the Woods Yet) here CHICAGO, February 02 (Fitch) Despite progress, Petrobras remains highly leveraged and will likely rely on external financing to refinance maturities, according to the latest report in Fitch Ratings' Spotlight series. One report in the series will be released each day through Feb. 6, 2017, following the schedule at the end of this release. "Although Petrobras has reported very positive progress on its divestiture plan, achieving its 2018 deleveraging targets could be challenging. Petrobras' business plan aims at significantly reducing net leverage to 2.5x by 2018 from 4.7x as of September 2016," said Lucas Aristizabal, Senior Director. "This implies a reduction in debt of approximately USD50 billion over the next two years assuming current EBITDA and cash levels stay constant. Fitch considers this deleveraging target aggressive as total divestiture expectations add up to USD35 billion for the period." Fitch now expects Petrobras' net leverage to be around 3.5x by the end of 2017 compared to 4.7x as of Sept. 30, 2016, assuming the company receives a significant portion of payments for divestitures during 2017. In order for Petrobras to reach its 2.5x net leverage target by the end of next year, it would have to receive an additional USD20 billion of proceeds from divestitures over the next 24 months and see EBITDA increase to close to USD30 billion. The new pricing policy announced in October 2016 is positive and will add transparency and marginally increase independence from the federal government to the extend it terminates the long-term detrimental government pricing control. Fitch's Spotlight Series on Latin American Issuers will be released one report per day as follows: Jan 9th - American Movil S.A.B. de C.V. Jan 10th - GOL Linhas Aereas Inteligentes S.A. Jan 11th - Avianca Holdings S.A. Jan 12th - CEMEX, S.A.B. de C.V. Jan 13th - Companhia Siderurgica Nacional Jan 17th - Marfrig Global Foods S.A. and Minerva S.A. Jan 18th - Grupo IDESA, S.A. de C.V. Jan 19th - Odebrecht Engenharia e Construcao S.A. Jan 20th - Braskem S.A. Jan 23rd - LATAM Airlines Group S.A. Jan 24th - Mexichem, S.A.B. de C.V. Jan 25th - JBS S.A. Jan 26th - Vale S.A. Jan 27th - Empresa Nacional de Telecomunicaciones S.A. Jan 30th - Digicel Group Limited Jan 31st - Petroleos de Venezuela S.A Feb 1st - Ecopetrol S.A. Feb 2nd - Petroleo Brasileiro S.A. Feb 3rd - Petroleos Mexicanos Feb 6th - Offshore Drilling Holding, S.A. The Spotlight series focuses on fundamental credit concerns, delving into the relative exposure to the main risk factors, as well as implications, for each rating. The full report titled "What Investors Want to Know: Petrobras" is available at www.fitchratings.com. Contact: Lucas Aristizabal Senior Director +1-312-368-3260 Fitch Ratings, Inc. 70 West Madison St. Chicago, IL 60602 Mauro Storino Senior Director +55 21 4503 2625 Media Relations: Elizabeth Fogerty, New York, Tel: +1 (212) 908 0526, Email: elizabeth.fogerty@fitchratings.com. Additional information is available at www.fitchratings.com. ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEB SITE AT WWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE CODE OF CONDUCT SECTION OF THIS SITE. 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