DECEMBER 23, 2014 — Moody's Investors Service today placed Petrobras S.A.'s Baa2 global foreign currency and local currency debt ratings on review for possible downgrade. The rating action reflects concern about potential liquidity pressures that could arise if the company does not meet requirements under its bond indenture for the delivery of financial statements.
Moody's notes that bond indentures include provisions requiring financial statements to be filed with the SEC and says that delays in presenting financial statements have resulted from ongoing corruption investigations at Petrobras. Extended delays in filing financial statements carry the possible risk that bondholders could elect to send a default notice, which after a period of time would enable bondholders to exercise remedies that include acceleration of principal.
Additional rating actions will consider any further developments, including passage of time that brings deadlines closer without progress. Moody's says its credit assessment of Petrobras will continue to take into account the level and type of government support, in case of need. In addition, Petrobras' ratings could be downgraded if financial leverage increases and is sustained with debt/EBITDA above 5x or if production growth falls short of targets. A downgrade of Brazil could also pressure Petrobras' ratings.