Fitch Rates Petrobras' US$1.25B Note Issuance 'BBB'
2009-07-02 18:29:04 -
Fitch Ratings has assigned a 'BBB' rating to Petroleo Brasileiro S.A.'s (Petrobras) US$1.25 billion 7.875% senior unsecured global notes due 2019 issued through its wholly owned subsidiary, Petrobras International Finance Company (PifCo). The notes are unconditionally and irrevocably guaranteed by Petrobras. The notes will be consolidated to form a single series and fully fungible with the US$1.5 billion notes issued
on Feb.
11, 2009. Proceeds will be used to refinance debt.
Petrobras' ratings are supported by its leadership position in the Brazilian domestic energy market, its recognized expertise in offshore exploration and production and its strategic importance to Brazil whose Issuer Default Rating (IDR) is 'BBB-' with a Stable Outlook by Fitch.
Over the past several years, a strong pricing environment has allowed Petrobras to implement various strategic initiatives aimed at ensuring its long-term growth in production and hydrocarbon reserves while improving its credit profile.
Additionally, significant discoveries strengthen further Petrobras' position in the global oil and gas industry. Also, Fitch recognizes the positive credit effect of the market-oriented measures implemented over the past several years as well as improvements in corporate governance.
Petrobras has established, at the highest levels of the organization, a commitment to transparency and best practices akin to that of private-sector enterprises.
These factors are tempered by vulnerability to fluctuations in international commodity prices, exposure to local political interference, currency risk, domestic market revenue concentration and significant medium-term capital-investment requirements, which will substantially increase leverage and weaken credit metrics during the current downturn in the economic cycle.
As a result of Petrobras US$174 billion five year investment plan, leverage is expected to increase by approximately US$30 billion over the next five years. This will drive credit metrics to weak levels for its current ratings until 2010. Fitch anticipates the incremental cash flow from investments in prior years and oil prices recovery to improve credit metrics in line with its historical levels by 2011. A deviation from this expectation would put pressure on credit quality. Also, investments in exploration and production (E&P) of about US$100 billion over 2009-2013 significantly improve the production and reserve growth prospects of the company.
Fitch also factors in its ratings no change in regulation over Petrobras' current concessions. A new regulation for the pre-salt area is expected to be discussed by Congress in the second half of this year.
This regulation is not expected to affect concessions awarded in the past and may favor Petrobras over international competitors. Also, incorporated in the ratings are the combination of ultimate government control, which underscores the ability to influence corporate strategy and long-term policy decisions as well as Petrobras domestic market focus.
Petrobras is an integrated international oil and gas company engaged in the exploration, development and production of hydrocarbons and in the refining, marketing, transportation and distribution of oil and a wide range of petroleum products, petroleum derivatives, petrochemicals and liquid petroleum gas. Petrobras is also an integrated power company with operations in electric power generation, transmission and distribution.
By law, the federal government must hold at least a majority of Petrobras' voting stock.
Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com :
cts.businesswire.com/ct/CT?id=smartlink&url=http%3A%2F%2Fwww .. .
Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.
Fitch RatingsJose Luis Villanueva, 212-908-9158, New YorkRicardo
Carvalho, 21-4503-2627, Rio de JaneiroorMedia Relations:Brian
Bertsch, 212-908-0549, New YorkEmail:
brian.bertsch@fitchratings.com : mailto:brian.bertsch@fitchratings.com Cindy
Stoller, 212-908-0526, New YorkEmail:
cindy.stoller@fitchratings.com : mailto:cindy.stoller@fitchratings.com
