S&P gives Petro Rio B, notes B+

S&P said it assigned a preliminary B rating to Petro Rio SA and a preliminary B+ rating with a 2 recovery rating to its planned $450 million of senior secured notes due 2025. The 2 recovery rating reflects the substantial recovery expectation on the notes (70%-90%).

The notes, which S&P said should help with liquidity pressures, will be sold through subsidiary Petrorio Luxembourg Sarl. Petro Rio will guarantee the notes.

We view Petro Rio as a small player, with expected EBITDA of about R$800 million in 2020 and increasing to R$1.6 billion-R$1.8 billion in 2021 considering the company's latest acquisitions and successful implementation of its planned investments. The expected increase in cash flow generation supports our view that absent any significant additional acquisition, the company will be able to reduce its debt to EBITDA to below 3x in 2021 from the forecasted 4x-4.5x in 2020,” S&P said in a press release.

The outlook is stable.

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