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Petrobras: Supplier finance

Petrobras’s business plan to develop the pre-salt oil fields anticipates that the number of rigs and drillships with drilling capacity greater than 2,000 metres will increase to 65 by 2020 from 15 in 2010. Many of these deliveries will be financed by Petrobras suppliers through the capital markets. Since 2010, Moody’s has publicly rated around $5.4 billion in project bonds associated with the operational phase of offshore drilling and production equipment to be deployed off the coast of Brazil for Petrobras. These secured bonds use special purpose vehicles, but the main ratings component is Petrobras’s long-term operating contract for the rigs or drillships. These off-balance-sheet structures enable Petrobras to use its investment-grade rating to support these deliveries without an impact on its credit rating.

However, a loss of Petrobras’s investment-grade status would also have a big impact on the active market for financing Petrobras’s suppliers. Fitch analyst Lucas Aristizabal says: "All of these transactions are heavily reliant on the off-taker credit quality. A deterioration of the off-taker credit quality will have a significant implication for the credit quality of these entities. We would never go above the off-taker credit quality [when rating these SPVs], and so to the extent you have a weaker off-taker you would have to have a lower cap for the supplier’s rating."

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