Petrobras Cut to Junk by S&P Following Brazil Downgrade

Petrobras Cut to Junk by S&P Following Brazil Downgrade
Paula Sambo
September 10, 2015 — 5:02 PM BRT
Reuters
S&P joins Moody’s in taking away Petrobras investment grade
Rate cut could lead to selloff by institutional investors

Petroleo Brasileiro SA, the oil producer mired in Brazil’s largest-ever corruption investigation, was downgraded to junk by Standard & Poor’s, which signaled the possibility of more cuts to come.
The state-controlled company’s foreign-currency rating was cut two levels to BB, a day after S&P reduced Brazil’s sovereign rating to speculative grade for the first time in seven years. The outlook for the company’s rating is negative.
S&P joins Moody’s Investors Service in moving Petrobras to junk amid an investigation into alleged kickback schemes at the company, a probe dubbed Carwash by local prosecutors. Because of internal rules, some institutional investors such as pension funds can’t hold securities rated junk by at least two agencies, which could lead to a selloff of Petrobras’s assets.