Fitch Joins Moody’s in Cutting Petrobras Rating to Cusp of Junk

Fitch Joins Moody’s in Cutting Petrobras Rating to Cusp of Junk

byJulia Leite

4:45 PM BRST
February 3, 2015

(Bloomberg) — – Petroleo Brasileiro SA’s credit rating was cut to the cusp of junk by Fitch Ratings after the company at the center of Brazil’s largest-ever corruption probe wasn’t able to account for the financial impact of the alleged graft.

Fitch cut Petrobras one step to BBB-, the lowest level of investment grade, and placed the rating on watch negative, according to a statement Tuesday. Moody’s Investors Service downgraded the state-run company to an equivalent Baa3 level on Jan. 29, citing concerns about liquidity pressures that might result from delays in delivering audited financial statements.

Petrobras last week released unaudited third-quarter earnings after a two-month delay as the company tries to account for losses related to the kickback case dubbed Carwash. The company failed to agree on how much it overpaid suppliers that allegedly paid bribes in return for contracts and is considering options to determine writedowns, Chief Executive Officer Maria das Gracas Foster said in a filing dated Jan. 27.

“The downgrade reflects the increased and prolonged uncertainty regarding Petrobras’ ability to estimate and record an adjustment to its fixed assets in a timely manner,” Fitch analysts led by Lucas Aristizabal wrote in the statement. “The decision to delay the recording of an impairment highlights the difficulties of estimating the magnitude of the corruption overpayments and fair value of fixed assets.”

In March, Standard & Poor’s downgraded the company to BBB-, the lowest investment grade, following a cut to Brazil’s sovereign rating.


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