Petroleo Brasileiro Petrobras SA (ADR) (NYSE:PBR) Finalizes An Agreement With Creditors

Petroleo Brasileiro Petrobras SA (ADR) (NYSE:PBR) has made an agreement with creditors under which it will release third-quarter results by the end of January 2015. The objective of the agreement is to wipe out the risk of default of the oil giant company.

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The details

Petroleo Brasileiro was charged with forming an alliance with some construction firms so as to increase the costs of contracts. After the collaborations, Petroleo Brasileiro Petrobras SA (ADR) (NYSE:PBR) had to deal with corruption allegations. The higher costs were used by the local politicians and former executives for fulfillment of their personal objectives.

The deadline

As per the bond agreement, Petroleo Brasileiro was supposed to disclose financial results by end of December 2014. However, it failed to report the financial results and now has to disclose the results in this month. The oil giant company has to declare results within 60 days failing which it would be liable to return 25% of the total bond value to bondholders. It is applicable only if Petroleo Brasileiro gets a default notice from the bondholders.

The issue and solution

Petroleo Brasileiro will disclose its assets value in the third-quarter financial results. The results are expected to be over-stated as it has failed to resolve corruption allegations till this time. Petroleo Brasileiro Petrobras SA (ADR) (NYSE:PBR) may not use the fair price accounting method which will show significant losses in the third-quarter results. Also, there is a huge debt in company’s books hurting investor’s confidence.

The management view

Maria das Graças Silva Foster, the CEO of Petrobras said that the company expects to solve the corruption scandal in the near future. The credibility of Petroleo Brasileiro Petrobras SA (ADR) (NYSE:PBR) has declined sharply in the last one year. Apart from the corruption charges, the company has to deal with the sharp decline of prices of crude oil in the last six months. The Brent crude has fallen below $50 and is showing no signs of respite.

About the Author

Michael joined US Markets Daily in 2009 and is a national news reporter focusing on economic issues, data analysis and the financial health of state and local governments.

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