Petrobras (PBR) Ratings Affirmed by S&P; SACP Assessment Revised to 'bb'

Standard & Poor's Ratings Services affirmed its 'BBB-' corporate credit rating on Petroleo Brasileiro S.A. – Petrobras (Petrobras) (NYSE: PBR). The outlook remains stable. At the same time, we affirmed our 'BBB-' senior unsecured ratings on the notes of Petrobras' wholly-owned financing vehicles-- Petrobras International Finance Co. and Petrobras Global Finance B.V.

We also revised downward our SACP assessment on Petrobras to 'bb' from 'bbb-'. This revision doesn't affect our final ratings on the company because they continue to benefit from what we view as the "very high" likelihood of extraordinary support from the government. Due to this support, there's a two-notch uplift in the company's SACP.

The SACP revision reflects Petrobras' weaker projected liquidity, more restricted market access to financing, and potentially weaker cash flow generation in light of the current corruption investigations. In our view, the company already had tight credit metrics for its previous SACP assessment, while its cash flows could suffer from lower capex execution (and consequently production ramp-up) and potential fines arising from Brazil Federal Police's and the U.S. Securities and Exchange Commission's investigations into allegations of corruption and money laundering, both of which have been widely publicized in the press. We have also revised our management and governance score to "fair" from "satisfactory" because we believe that Petrobras has lesser ability to identify and effectively control critical strategic risks, as seen in the corruption investigations and delays in releasing its financial statements.

The ratings on Petrobras reflect our view of the "very high" likelihood that the government would provide timely and sufficient extraordinary support to the company in the event of financial distress. Under our government-related entity criteria, absent any rating action on the sovereign or our reassessment of the government support likelihood, a downgrade would occur only if the company's SACP were to fall to 'b' or below.

You May Also Be Interested In

• Shake Shack (SHAK) Announces Resignation of Jonathan Sokoloff from Board, Cuts Board Size to 10 from 11
• Genetic Technologies (GENE) Announces $2 Million Registered Direct Offering
• Serve Robotics (SBOT) Prices 10M Share Offering at $4/sh, Uplists to Nasdaq