- Petrobras (NYSE:PBR) -1.8% premarket after Standard & Poor's decision to cut Brazil's sovereign credit rating to junk status on Wednesday was followed by a separate downgrade for the state-run company yesterday.
- PBR says its project financing is sound in the medium term and not affected by the downgrade, but Reuters reports the company likely will cut back its spending plans even further as growing debt costs, falling oil prices and Brazil's weak currency already have made the plan obsolete, Reuters reports.
- The June plan, hailed as a return to reality after years of missed output goals, record spending and a giant corruption scandal, cut the 2015-19 spending goal to $130B from $221B.
- PBR's plan also assumed the real would average 3.10 to the dollar in 2015 and 3.26 in 2016, but the currency has weakened 19% since then to 3.85, driving up the local cost of paying off debts, most of which are in dollars.
- Shares are downgraded to Neutral at J.P. Morgan and BofA/Merrill.