Petrobras Likely to Get Government Support If Needed, Fitch Says
5:09 PM BRT February 27, 2015
(Bloomberg) — Brazil will probably provide funding to Petroleo Brasileiro SA if the state-controlled oil producer remains unable to borrow from banks or sell bonds amid an ongoing corruption scandal, according to Fitch Ratings.
Funding could come through the country’s government-owned banks including BNDES, Joe Bormann, managing director for Latin America corporate finance at Fitch, said in an interview in Sao Paulo. He said such support underpins Petrobras’s rating from Fitch, currently at the lowest investment grade of BBB-.
Moody’s Investors Service chopped Petrobras’s credit to junk this week on concern the corruption investigation will crimp its ability to obtain financing, triggering concern that a similar downgrade by Fitch or Standard & Poor’s could force some institutional investors to sell their holdings of the company’s bonds. The oil producer has been unable to report audited quarterly results because of difficulties estimating the size of corruption-related writedowns.
Government support “makes sense in this environment and is considered by us in the current rating,” Bormann said. “BNDES has been a big lender to the company. It is likely the public banks will continue to provide substantial funding to Petrobras.”
The oil company’s $2.5 billion in bonds maturing in 2024 increased 1.20 cents to 91.73 cents on the dollar as of 2:53 p.m. in New York.
The government offered Petrobras as much as 6 billion reais ($2.1 billion) from state banks to strengthen the company’s cash position, the newspaper Estado de S. Paulo reported Thursday, citing an unidentified executive at the company. Petrobras has about $52 billion of bonds.
The oil company is seeking loans from financial institutions and more asset sales as it grapples with a graft investigation that has temporarily shut it out of debt markets.
“The government’s support of Petrobras and its importance to the economy are crucial credit considerations,” Bormann said.
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