Petrobras Faces Default Risk

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

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