Moody’s rates Petrobras Global notes B3

Moody's Investors Service said it assigned a B3 rating to Petrobras Global Finance BV's proposed global notes, which will be unconditionally guaranteed by Petroleo Brasileiro SA (Petrobras, B3 negative).

The B3 rating is based on the rating of Petrobras.

The proposed notes are senior unsecured and pari passu with Petrobras Global Finance’s and Petrobras' other senior foreign currency debt.

Proceeds will be used for debt refinancing and other general corporate purposes.

The outlook is negative.

Moody’s said the B3 rating is based on Petrobras' caa2 baseline credit assessment (BCA), which indicates the agency’s view of its standalone credit strength, and considers the company's steadily eroding liquidity, negative free cash flow, high financial leverage, local currency devaluation risk and operating challenges in a difficult industry and economic environment.

Consolidated free cash flow will remain negative for the foreseeable future as its upstream business suffers from extremely weak oil prices and downstream operations are being hurt by lower demand, high competition and local currency volatility.

The company also faces significant risks related to corruption investigations and class action securities litigation, Moody’s said.

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