Petrobras Seeks Funds as BofA Sees Need for Asset Sales

Petrobras Seeks Funds as BofA Sees Need for Asset Sales

By Peter Millard

10:08 AM BRT  February 26, 2015


(Bloomberg) — Petroleo Brasileiro SA, the world’s most-indebted publicly traded oil company, said it’s seeking financing options and studying cost cuts following a downgrade to junk by Moody’s Investors Service.

Petrobras, as Brazil’s state-run oil producer is known, plans to release audited results “as soon as possible” and is taking steps to preserve cash and cut its debt load, according to a statement released late Wednesday in Rio de Janeiro. The company needs to sell at least $20 billion in assets and reduce capital expenditures to about $25 billion this year to improve finances, Bank of America Corp. said in a report dated Wednesday.

A corruption scandal engulfing the biggest deepwater producer — a decade-old story of alleged kickbacks, bribes and inflated construction contracts — has transfixed the nation and left Brazilian President Dilma Rousseff struggling to contain the damage. Petrobras’s failure to assess the magnitude of losses from the widening scandal has rendered it unable to produce third-quarter results, causing delays that if prolonged could lead to a bond default, Moody’s said Feb. 24 when it announced the cut.

The company’s board will meet tomorrow to discuss writedowns for costs related to corruption that have prevented it from releasing audited results, said a person with knowledge of the agenda. The newly-earned junk rating puts pressure on new Chief Executive Officer Aldemir Bendine, who took over earlier this month, to resolve the accounting delays and restore access to capital markets.

‘Monumental Task’

“The new CEO has a monumental task ahead of him as he oversees another impairment assessment and clears it with auditors,” Christopher Garman, head of emerging-markets research at consulting firm Eurasia Group, said in a note on Wednesday.

Petrobras previously announced plans to sell assets totaling about $3 billion for this year. Brazil’s government has offered as much as 6 billion reais ($2.1 billion) in loans from state banks to help strengthen the company’s cash position, Estado do S. Paulo newspaper reported on Thursday, citing an unidentified Petrobras executive.

The board is seeking to resolve a deadlock with auditor PricewaterhouseCoopers about how to calculate the amount of graft-related costs, said the person, who declined to comment because the information isn’t public.

PwC declined to comment in an e-mailed response to Bloomberg. Petrobras didn’t immediately reply to messages seeking comment on the meeting or the topics under discussion.

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