By Filipe Pacheco and Sabrina Valle
(Bloomberg) -- Petroleo Brasileiro SA’s descent into junk-
bond status may be far from over.
Moody’s Investors Service kept a negative outlook on the
state-controlled oil producer’s rating after cutting it to Ba2,
two levels below investment grade, on Tuesday. The two-step
downgrade marks the second cut by Moody’s in less than a month
for the company, which is embroiled in a widening graft probe.
Petrobras’s bonds and stock have plunged since November,
when police arrested more than 20 people as part of an
investigation into whether company executives demanded bribes
from builders in exchange for contracts. Fitch Ratings and
Standard & Poor’s rate the company at their lowest investment
grades, and internal deliberations on corruption-related
writedowns have led to delays in releasing third-quarter
results.
“The cut by two notches can be seen as surprising,”
Carlos Gribel, the head of fixed income at Andbanc Brokerage
LLC, said by telephone from Miami. “The main concern now will
be another cut to junk by Fitch or S&P, which could lead the
company’s bonds to be sold by many institutional investors.”
The probe prompted Chief Executive Officer Maria das Gracas
Foster to step down earlier this month, after she failed to
broker a consensus on the size of the writedowns.
Rio de Janeiro-based Petrobras said in a regulatory filing
on Tuesday that it has no bond covenants that would be triggered
by a downgrade to junk.
