Petrobras Settles With Pimco, Investors Over Corruption Losses

  • Brazil company add $353 million in quarter for legal costs
  • Class-action case, 23 other U.S. lawsuits still pending

Brazil’s state-run oil company Petroleo Brasileiro SA settled four lawsuits brought by investors including Pacific Investment Management Co. after the nation’s biggest-ever corruption case torpedoed the company’s market value.

Petrobras’ board approved agreements with Pimco Total Return Fund, Janus Overseas Fund, Dodge & Cox International Stock Fund and Al Shams Investments, according to a statement filed with Brazil’s securities regulator. Petrobras will include a $353 million provision in its third-quarter financial statements to reflect the settlements as well as ongoing negotiations with other plaintiffs, according to the statement.

The world’s most indebted oil producer is laboring to right itself after a multi-year probe revealed a systematic pay-to-play scheme that siphoned money to politicians and corrupt executives. Chief Executive Officer Pedro Parente, who took over the company’s helm in June, has the tasks of resolving its pending lawsuits, trimming expenses, divesting assets, and making company management more independent to prevent government interference.

The suits Petrobras settled, all of which were filed with the U.S. District Court for the Southern District of New York in the past year, sought to recover losses from 2010 to 2015. Pimco, for example, claimed that former members of Petrobras’ top management artificially inflated the stock price by making false statements and omitting adverse information.

Corruption may have cost Petrobras as much as 42 billion reais ($13 billion), according to federal prosecutors. Parente said in an interview last month that Petrobras is a victim and said the legal battles are a challenge. In addition to the settlements, Petrobras faces 23 similar cases and is defending itself in a class-action lawsuit brought by minority shareholders.

“At this time, it is not possible for the company to make a reliable estimate with respect to the potential outcome of the class action,” Petrobras said in the statement that denied any wrongdoing. Terms of the settlements are confidential and intended to eliminate the uncertainties and legal expenses, the company said.

Petrobras on Friday won its first credit rating upgrade in five years, from Moody’s Investors Service. The ratings company raised the company one level to B2, which is five levels below investment grade, with a stable outlook. Its $2.5 billion of bonds due in 2024, a benchmark for the company, have climbed 40 percent this year to 100.1 cents.

— With assistance by Sabrina Valle

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