Fitch rates Petrobras notes BB

Fitch Ratings said it assigned a BB rating to Petrobras (Petroleo Brasileiro SA)’s proposed $4 billion notes issuance.

The notes will be issued by Petrobras Global Finance BV and will be unconditionally and irrevocably guaranteed by Petrobras.

The proceeds will be used to refinance existing debt and for general corporate purposes, Fitch said.

The company’s ratings continue to reflect its close linkage with the sovereign rating of Brazil due to the government's control of the company and its strategic importance to Brazil as its near-monopoly supplier of liquid fuels, the agency said.

By law, the federal government must hold at least a majority of the company’s voting stock, Fitch explained.

The government currently owns 60.5% of Petrobras' voting rights, directly and indirectly, and has an overall economic stake in the company of 46%, the agency said.

But Fitch also said it expects the company’s cash flow generation to remain under pressure despite price increases and the company's efforts to reduce capital expenditures.

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