Fitch darkens rating outlook on Petrobras probe firms

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Thursday, November 20, 2014

Fitch has placed Brazilian heavy construction companies on a negative rating watch because of their involvement in the Petrobras corruption probe.

The move reflects concerns about the financial and business impacts on infrastructure firms of the investigation, dubbed Operation Car Wash, the rating agency said.

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Officials in Brazil and the US are investigating allegations of money laundering involving Petrobras and external companies.

Fitch said the firms will face challenges including the following: potential suspensions, delays or partial write-downs on contracts with Petrobras; heightened scrutiny of any present or future contracts with Petrobras and government entities; the possibility of being excluded in future projects; and the withholding of funding from private banks, capital markets, as well as government backed loans.

Involved parties could also face penalties, Fitch said.

Companies specifically named in the Fitch release include Andrade Gutierrez, Camargo Corrêa, Odebrecht, OAS, and Queiroz Galvão.

Augusto Nardes, a senior official with Brazil's federal audit court TCU, warned that forcing firms under investigation to down tools would harm the country as many are involved in large infrastructure projects both in Brazil and overseas.

Fitch has also said that the investigation, which has led to the arrest of former Petrobras services director Renato Duque, could threaten Petrobras' production goals.