Petrobras Rating Reviewed at Moody’s on Financial Results Delay

Petroleo Brasileiro SA, the Brazilian oil producer mired in the country’s largest-ever corruption investigation, is a step closer to seeing its credit rating cut after Moody’s Investors Service placed it under review.

Petrobras’s Baa2 rating, the second-lowest investment grade, may be lowered as concern mounts about the company’s ability to raise cash amid delays in releasing financial results, Moody’s said in a statement today. On Dec. 3, it reduced the state-run company’s baseline credit assessment, which doesn’t take into account government support, to junk.

The producer, which has posted negative free cash flow in every quarter since 2010, has twice delayed quarterly financial statements as it works to adjust the value of assets to account for costs tied to the corruption investigation. The Rio de Janeiro-based company must report unaudited results by the end of January to avoid violating agreements on some bonds, which may prompt creditors to demand their money back.

The corruption probe dates to March, when police began arresting people suspected of money laundering and other crimes. Several figures subsequently turned state’s witness. In their testimony, much of which has been released by the court in charge of the case, they describe a cartel of construction companies that for years fixed bids on Petrobras contracts and paid bribes to executives at the oil producer.

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