Default Risk Circles Brazil’s State-Run Oil Company Petrobras
According to Aurelius Capital Management’s senior executive, Petrobras, a state-run Brazilian multinational energy corporation headquartered in Rio de Janeiro, is facing risk of being declared in default on billions of dollars of debt even after releasing its delayed third-quarter earnings.
The
results, which failed to include an expected charge against earnings
related to a corruption scandal, may even add to the number of bond
covenants, or legal promises to investors, that have been broken by the
company, a senior executive at Aurelius Capital Management said.
The
default threat is another headache for Petrobras, which has been caught
in a political and financial fire storm over the biggest graft scandal
in Brazil's history.
In
particular, Petrobras' comment in "Note 2" of its unaudited results
saying that they do not fully meet the International Accounting
Standards Board's (IASB) standards shows non-compliance, said Mark
Brodsky, Aurelius' chairman.
The
Petrobras note to its results says those disclosures related to assets
whose value may have been inflated by corruption do not comply with the
IASB's IAS-34 rule.
"Despite
its recent assurances, Petrobras remains in default on its New York-law
bonds," Brodsky said in a statement sent to Reuters. "Those bonds
require Petrobras to issue financial statements that comply with IASB
rules, but Note 2 to the new financial statements admits that they do
not."
Source: Reuters