The rating agency Moody’s upgraded corporate debt rating for the Brazilian oil giant Petrobras from B2 to B1 and changed the outlook from stable to positive.
According to Petrobras, Moody’s highlighted the continuous improvement of the company’s liquidity profile and financial metrics over the last quarters on its report, due to greater cost efficiency and the new fuel pricing policy, among other factors.
Those factors have also helped the company to maintain access to capital markets and refinance part of its debt; so far in 2017 the company has tendered approximately $6 billion in notes and issued $4 billion in new notes, which allowed it to reduce debt and extend its debt maturity profile.
The agency emphasized developments in the Brazilian regulatory environment, which facilitate greater returns in long-term investments. Additionally, Petrobras said the agency recognized the company’s management commitment to achieve the financial and operating targets set in the 2017-2021 Business and Management Plan.
Despite the material improvements, Moody’s said that Petrobras’ liquidity risk remains a concern. As of December 31, 2016, Petrobras’ maturing debt in 2017 and 2018 was $8.8 billion and $11.3 billion, respectively, for a total of $19 billion in the next 2 years.
Other threats to Petrobras’ liquidity, as well as to its operating and financial performance, include execution risk related to the 2017-21 business plan and potential delays in fully executing its asset sales plan. It is positive, however, that the company has managed to settle with 19 out of 27 individual investors on legal disputes related to the Car Wash investigation, somewhat reducing uncertainty about the amounts of additional settlements and fines, including the ones related to the U.S. Securities Exchange Commission (SEC)’s the U.S. Department of Justice (DoJ)’s investigations.
Finally, the agency reported that the positive outlook indicates that, in the next 18 months, if the company’s liquidity and overall credit risk continues to improve, further positive rating actions could occur.