Brazil’s Eletrobras Cut to Junk by Moody’s, May Be Cut Further

Centrais Eletricas Brasileiras SA, Brazil’s largest utility by revenue, was cut to junk by Moody’s Investors Services.

The ratings company downgraded Eletrobras one level to Ba1, according to a statement Thursday. The credit grade remains on review for downgrade, Moody’s said.

While the utility showed “some financial improvement” in first-quarter earnings, its credit metrics remain too weak for the lowest level of investment grade, Moody’s said. The ratings company also cited an investigation on alleged bribes involving the former chief executive officer of a subsidiary. Chief Financial Officer Armando Casado De Araujo said on a conference call this week that Eletrobras is close to hiring a company to start an investigation.

Moody’s would consider another downgrade “should projections indicate that credit metrics will not materially improve over the next 12 to 18 months,” Jose Soares, an analyst at the ratings company, wrote.

The rating change affects $1.75 billion of the company’s senior unsecured bonds due October 2021, Moody’s said. The notes advanced 0.9 percent this year to 95.9 cents on the dollar.

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