The dollar’s slide down today against the real gave Brazil’s stock market a nice bump. On top of that, S&P’s affirmed its ‘BB’ global scale ratings on Petrobras, citing a “very high likelihood of extraordinary government support” for the company’s heavy debt load. Petrobras’ shares went up by nearly 5% this afternoon but S&P lowered the company’s stand-alone credit profile to ‘b-‘ from ‘b+’ and lowered its Brazilian national scale rating to ‘brA+’ from ‘brAA.’
S&P’s verbatim argument is as follows: “Although Petrobras‘ management has taken some measures to improve the company’s governance while prioritizing profitability and liquidity over production growth, the exogenous variables have worsened, especially the political environment in Brazil, commodities prices, and foreign exchange rate. As a result, assets disposals and market access have been more challenging for Petrobras, its debt levels have increased significantly, and its deleveraging pace is likely to be much slower … The negative outlook reflects Petrobras‘ difficulties in improving its capital structure and maintaining its liquidity, amid potential contingent liabilities during the next 12-18 months.”
Source:Petrobras Debt Ratings Affirmed By S&P
By Dimitra DeFotis
3 February 2016
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