Analyst: Petrobras Likely To Meet Key Reporting Deadline

Brazil's sovereign debt rating will dodge a downgrade and Petroleo Brasileiro Petrobras SA

will meet an April 30 deadline to release audited financial statements, an analyst said Monday. Morgan Stanley's Paolo Batori boosted his rating on Brazilian notes to Overweight and maintained an Equal-Weight rating on the state-run oil company Petrobras. Batori believes that Petrobras will most likely meet its April 30 deadline, thus avoiding accelerated debt repayment demands and a melt-down in its bond prices that could require the Brazilian government to step in with guarantees. Those guarantees could, in turn, threaten Brazil's sovereign debt rating. Petrobras delayed release of results in the wake of the a bribery investigation disclosed in November. Brazil has separately sought to defend its sovereign rating with a series of austerity measures including tax hikes and spending cuts, which Batori called "impressive," but which he said will cause a recession. The biggest risk to Brazil's sovereign rating is that its fiscal efforts "are overshadowed by having to absorb contingent liabilities from Petrobras," Morgan Stanley's Arthur Carvalho said. Petrobras, meanwhile, may have sufficient liquidity to operate through 2015 without raising cash, according to Batori. But 2016 may require a Petrobras equity offering of $30 billion to $40 billion, Batori said.