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Analyst Bruno Montanari put the price target for
U.S.-traded shares of Petrobras <PBR.N>, as the company is
known, under review and was reassessing earnings estimates as a
consequence of the scandal. The note was obtained by Reuters on
Wednesday.
An internal investigation, which Chief Executive Maria das
Graças Foster kicked off as federal prosecutors found evidence
of a criminal scheme operating within the company for years,
should lead to asset writedowns ranging from 5 billion reais to
21 billion reais, Morgan Stanley said. The dividend cut could
impact the company's common shares <PETR3.SA>, Montanari said.
The report underscores the headwinds facing Petrobras, which
once was the crown jewel of Brazil's economy, but in recent
years has become a symbol of the country's fall from grace.
Preferred shares of Petrobras <PETR4.SA> rose for the first day
in five on Wednesday.
Petrobras delayed the release of third-quarter earnings last
week following accusations that the company systematically
overpaid for assets and work by contractors. The excess funds
were then funneled to political parties including President
Dilma Rousseff's ruling Workers' Party, prosecutors said.
If federal and company probes extend for longer than expected
and further evidence of wrongdoing is presented, Petrobras could
also face restricted access to funding that could force the
company to ramp up debt or look for an equity issuance, the note
added.
"We believe that while investigations are ongoing, the company
might face difficulties - and higher costs - in its traditional
early-year debt issuance," the note said. "In addition, if there
is a material delay in the release of annual audited financials,
the company would be at risk of outstanding bonds acceleration."
In that case, a solution could be a share offering that "could
be very dilutive," Montanari noted.
Investors in Petrobras are increasingly concerned that the
world's most-indebted major oil company may technically slip
into default on about $12 billion worth of global bonds if it
fails to report unaudited earnings by year-end.
($1 = 2.5821 Brazilian reais)
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