JPMorgan Predicts A Credit Rating Downgrade For Brasileiro Petrobras SA

In a report on Friday, JPMorgan said that Brasileiro Petrobras SA share is on the edge of getting one more credit downgrade.

In last few months, Petrobras’ (ADR) (NYSE:PBR)credit ranking has been downgraded by the renowned credit rating agencies after the devastating corruption scandal surrounded the company. Fitch, Moody’s and Standard and poor’s have given the lowermost investment rating to Brazil’s  largest oil and gas producer’s long-term bonds.

Furthermore, if the North American company failed to recover from the current crisis, Fitch and Moody’s are revising their rating with a purpose to downgrade.

As per the Moody’s report, it is the first time that it has given Petrobras a junk rating. The rating agency has previously given the company time till the end of February to report its audited third quarter results. However, Petrobras failed twice to publish its 3rd quarter results for the year 2014 because the company disagrees with the charges of asset impairment caused by corruption and bribery scandal.

During the previous month, Petrobras reported its unaudited 3rd quarter results but the company’s management rejected the asset impairment charges by calling it “impracticable”. Following by the statement by the company Moody’s downgraded its rating from Baa2 to Baa3, which is the lowest investment rating. Shareholders and investors were disappointed.

Brazil’s largest oil and natural gas producer has outstanding bonds valued at $55.7 billion including $42.5 billion denominated in United States dollar. JPMorgan Chase & Co.(NYSE:JPM) said the company stock will go down if the downgrade happens. However, JPMorgan believes that the company will report its audited financial statements without evading on its long-term bonds.

Moody’s mentioned the concerns curtailing from the corruption scandal faced by the company, in downgrading the most obligated Oil Company in the world. Petrobras executives have been accused of colluded with construction companies to increase the contract prices of Petrobras, and bribing the politicians and other government executives by making donations.

The crude oil prices overlapped the corruption scandal. During the last six months, oil price has fallen by almost 50% after being traded at $100 for several years. West Texas Intermediate crude oil futures are now being trading at $50.34 per barrel, the delivery is due in March. However, Brent crude oil futures for March delivery period stand at $60.22 per barrel.

Petroleo Brasileiro Petrobras SA (NYSE:PBR)stock is up by 0.30%, with share price of $6.66 at market closed on Friday February 20th, with 30-days average volume of 46.43 million shares. The Latin –American company has a 52-week low of $5.79, and a 52-week high of $20.94, with market cap of $43.67 billion and price to earnings ratio of 6.31.

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