Fitch Rates Petrobras $2.47B Bond Issue BBB

Fitch Ratings put a rating of BBB on a $2.47 billion bond issue by Petrobras (NYSE: PBR), Brazil's state-run oil giant. The bonds will be denominated in euro and split into tranches of EUR1.25 billion and EUR600 million that will mature in 2018 and 2022.

The bonds will be issued by Petrobras International Finance Company, which Fitch has a stable outlook on. Petrobras said earlier this year it would look to issue non-dollar denominated bonds as part of its effort to raise cash for its $224.7 billion five-year exploration and production budget.

“The ratings are tempered by Petrobras' exposure to local political interference and its significant medium-term capital-investment program, along with vulnerability to fluctuations in international commodity prices, currency risk, and domestic market revenue concentration,” Fitch said in a statement.

Fitch has a stable outlook on Petrobras, but said that outlook “is likely to be revised to Negative if global oil and natural gas demand and/or prices decline sharply or for a long period, which delays the recovery of its credit metrics, or if debt funded capex is significantly above Fitch's current expectations.” The ratings agency said a revision to a positive outlook is “unlikely.”