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Petrobras stocks plummet after Moody's downgrade

Xinhua, February 26, 2015 Adjust font size:

Brazil's state oil and gas producer Petrobras' shares plummeted on Wednesday, one day after credit rating agency Moody's cut its rating amid a widening corruption probe.

Moody's on Tuesday cut the company's rating to Ba2, two levels below investment grade, and downgraded its Baseline Credit Assessment from ba2 to b2. In addition, Moody's said it would maintain the ratings in review for further downgrade.

On Wednesday, shares in Petrobras fell more than six percent below 10 Brazilian reals (3.50 U.S. dollars) after Moody's stripped the company of its investment-grade rating.

Market reaction prompted Brazilian President Dilma Rousseff to speak out against the decision. The downgrade reflected a lack of knowledge of Petrobras'situation, Rousseff said, expressing her confidence that the company will recover from the current setbacks.

"I have no doubt this is a company with great capacity to recover," the president said in a press conference in Bahia state.

According to Moody's, the downgrade is due to increasing concerns about the investigations on the huge corruption scheme which involved several high executives and major construction companies in Brazil.

"These rating actions reflect increasing concern about corruption investigations and liquidity pressures that might result from delays in delivering audited financial statements, as well as Moody's expectation that the company will be challenged to make meaningful reduction in its very high debt burden over the next several years," the agency said.

Though Moody's downgraded Petrobras, the company still has an investment grade according to the other two major credit ratings agencies, Standard & Poor's and Fitch Ratings. Endite