Moody’s upgrades Petrobras and changes outlook to ‘stable’

Credit rating agency Moody’s upgraded Petrobras’ debt rating from B3 to B2 on 21 October 2016, citing reduced liquidity risk as a factor (Valor, UOL). It also changed its outlook for the state-owned oil firm from “negative” to “stable.” The firm has sold US$9.1 billion of assets over the past few months to reduce its leverage in accordance with its 2017-2021 corporate plan, which foresees a reduction in net leverage (Net Debt/EBITDA) from 5.3x at the end of 2015 to ~2.5x by the end of 2018. Further, it exchanged ~US$10 billion of outstanding debt in the third quarter, extending the term and reducing the maturity of their overall debt profile.

A company is considered “investment grade” when achieves a rating of at least Baa3 from Moody’s or BBB- from Standard & Poor’s. Amidst the Lava Jato scandal, declining oil prices, and significant overleverage, Petrobras lost its investment grade rating in February 2015, when Moody’s downgraded the firm from Baa3 to Ba2. As of 30 June 2016, Petrobras, with ~US$115 billion in long-term debt, remained the world’s most indebted company (Company financials).