Petroleo Brasileiro S.A. - Petrobras (PBR)

[Wildbilly]

Petrobras' Massive Earnings Delay Won't Effect Credit Rating


Brazil’s state-owned oil company has seen its better days. Politics has gotten in the way of one of the most technologically advanced deep water drillers in the Americas, if not the world. A recent political scandal involving top management at the firm has delayed its earnings report. Petrobras said this week that it might not release those figures now until the end of the year.

And on Friday, a senior Moody’s credit analyst named Nymia Cortes de Almeida told Agencia Estado newswire in São Paulo that this long delay will not effect Petrobras’ investment grade, at least for now.

“The late release of the audited quarterly earnings report doesn’t impact ratings in the short term,” Nymia was quoted saying, adding that it does call into question Petrobras’ corporate governance, which can impact a company’s credit outlook. Moody’s has Petrobras rated as Baa2, one step above the Baa3 rating, which is the lowest investment grade score. Corporate credit ratings act like consumer credit scores. The better the rating, the lower the interest rate a company can obtain in the market.

Petrobras said in a note with the local securities and exchange commission that a number of contracts with covenant clauses are holding up the process. Moreover, PricewaterhouseCoopers last week said it would not sign off as auditors of the earnings report until it heard back from the final results of the investigation. As a result of this, Petrobras shares have finally fallen below support levels of $10 and are now trading in the single digits.

Stanfard & Poor’s said in a report last week that a Federal Police investigation into money laundering at Petrobras, mainly via phony contract pricing, would not impact the company’s BBB- score. If Petrobras’ credit rating was cut, it would likely put it in the speculative category, hurting the company’s high debt and punishing shareholders as well. S&P said the firm would make a decision on Petrobras credit within the next 90 days.


–Petrobras remains a massive risk play for investors. As warned here at FORBES, the stock has finally fallen into single digits. The stock price is now dependent on which direction an investigation into money laundering goes in the weeks ahead. PwC said it will not sign off on PBR earnings until the investigation is cleared.

http://www.forbes.com/sites/kenrapoza/2014/11/16/petrobras-massive-earnings-delay-wont-effect-credit-rating/?partner=yahootix



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