Moody's cuts Petrobras ratings close to junk status

SAO PAULO - Moody's Investors Service downgraded all ratings pertaining to Brazilian oil giant Petrobras late Thursday, citing concerns over a vast corruption scandal.

The New York-based credit ratings agency said it had cut Petrobras's senior unsecured debt from Baa2 to Baa3, the lowest investment grade rating on the agency's scale. 

"The rating actions reflect concerns about corruption investigations and liquidity pressures that might result from delays in delivering audited financial statements," Moody's said Thursday night.

"The Baa3 rating reflects the deepening scope of the investigation of improper payments, which Moody's believes heightens uncertainty about the timely delivery of audited financial statements and could lead to significant liquidity pressures," it said, adding that ratings for Petroleo Brasileiro SA, as Petrobras is formally known, "remain on review for further downgrade." 

Any additional cut would see the state-controlled company enter speculative or "junk" territory.

The news led to the company's assets slumping 6 percent on the São Paulo-based Bovespa stock exchange when it opened Friday. 

It failed to regain lost ground by 1 p.m. in São Paulo (1500 GMT), when it was down 6.51 percent. The Bovespa was also operating down 1.4 percent at the same time.

It follows a turbulent week for the company in which it lost nearly 11 percent on its bonds Wednesday after it released a repeatedly-delayed and unaudited financial report for the third quarter of 2014.

The report, which was finally released in the middle of the night, showed earnings had fallen 38 percent on the previous quarter, or 9 percent year-on-year.

Investors were promised in December that the report would include writedowns for assets lost in the vast corruption scheme.

Local media reported that the company was about to reveal losses of $33.9 billion (88.6 billion reais) at Friday's exchange rate. 

Petrobras Chief Executive Maria das Graças Foster, however, said that the figures were unreliable, and therefore were not included; she also warned that the final total lost to improper payments, made between 2004 and 2012, could be more than previously expected.

Foster later announced that the company would cut back on investments to a "bare minimum necessary" and that new projects, including the Comperj refineries being constructed in Rio de Janeiro state, would be decelerated.

Moody's said Petrobras had "failed to provide any clarity about the magnitude of these adjustments."

Prosecutors said Thursday that $783 million (2.1 billion reais) had been directly diverted from Petrobras, and that Operation Lava Jato, or Car Wash, was currently investigating some 150 people and over 200 companies.

Three former Petrobras directors and 40 others from some of Brazil's biggest companies have been arrested under the operation.

More arrests are expected in the coming weeks.

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