MercoPress. South Atlantic News Agency

Moody's downgrades Petrobras credit rating; warns of difficulties to raise cash through asset sales

“Petrobras' elevated refinancing risks in the face of deteriorating industry conditions that make it more difficult to raise cash through asset sales”

Moody's Investors Service has lowered Brazilian state-controlled oil company Petrobras' credit rating further into junk territory and warned of a possible further downgrade. “These rating actions reflect Petrobras' elevated refinancing risks in the face of deteriorating industry conditions that make it more difficult to raise cash through asset sales,” the New York-based ratings agency said Wednesday.

In lowering Petrobras' debt to Ba3 from Ba2, Moody's took into account the agency's decision to place Brazil's sovereign debt rating on review for downgrade; a move prompted by, among other things, the initiation of impeachment proceedings earlier this month against President Dilma Rousseff.

That political development has cast “further doubt on the prospect of cooperation between Congress and the president to approve meaningful fiscal consolidation measures in 2016, and leaves very little chance of tackling the worsening medium-term fiscal trends” in the recession-hit country, Moody's said.

Moody's was the first of the Big Three credit rating agencies to downgrade Petrobras to junk status, a decision that could lead conservative funds to sell their stakes in the company.

Petrobras Brazil's largest company, accounting for 12% of GDP has been embroiled in an ongoing bribes-for-contracts scandal that allegedly dates back to the 2000s and is estimated to have resulted in billions of dollars being siphoned from the oil giant.

Top executives of leading construction and engineering firms that formed a cartel to overcharge the oil company, Petrobras officials who approved the deals in exchange for bribes from those sub-contractors and politicians from the ruling coalition of Lula da Silva and Dilma Rousseff who took kickbacks have been sentenced to prison terms in the wide-ranging and ongoing corruption probe.