Moody’s upgrades Petrobras ratings to Ba3 and stable outlook

Decision is made on improvement of liquidity, deleveraging, administrative discipline and strengthening of corporate governance

By Marta Nogueira, Reuters

Posted on Oct 17 2017, 12h38

Rio de Janeiro – Risk rating agency Moody’s upgraded Petrobras’ credit rating to Ba3, ahead of B1, and changed its outlook from positive to stable, according to a statement released on Tuesday.

The update, according to the agency, reflects Petrobras’ improved liquidity, reduced debt leverage, sound management discipline, and strengthened corporate governance.

Despite the improvement, Petrobras’ rating still remains a speculative grade – which means that the company potentially faces more difficult conditions to raise securities.

In the statement, Moody’s noted that the company’s credit profile increase is specifically related to a more comfortable debt profile, a result of debt refinancing and a “solid” cash flow generation.

The agency pointed out that so far this year, Petrobras has captured 19.2 billion dollars in capital markets, mainly global bonds, in funds that were used to refinance debt maturities.

In addition, Moody’s considered that Petrobras’ cash flow has become more predictable as a result of relatively stable oil prices, a clear domestic fuel price policy since the end of 2016, reduced operating costs and capital investments disciplined

Despite considering that the government’s promised asset sales fell in pace in 2017, Moody’s pointed out that divestitures are less relevant now to Petrobras’ liquidity position than it was 12 months ago, owing to the positive results achieved in debt and cash flow .

However, according to the agency, Petrobras’ ratings are limited by high levels of debt, risk of execution of the business plan and, to a lesser extent, potential negative impact of fines related to Lava Jato.

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