Moody's Downgrades Ratings of RB Capital Securitizadora and RB Capital Companhia de Securitizacao

Strategic Insights -

Moody's Investors Service has downgraded the ratings of several series of certificates issued by RB Capital Securitizadora and RB Capital Companhia de Securitizacao, following a similar downgrade of Petrobras' ratings in February 2015. The certificates, backed by built-to-suit lease agreements with Petrobras, have seen their global scale ratings reduced to Ba2 from Baa3 and national scale ratings to A1.br from Aa1.br. Moody's has placed these ratings on review for further downgrade, citing Petrobras' ability to make payments under the lease agreements.

Key Takeaways:

  • Moody's has downgraded the global scale ratings of the 3rd, 4th, and 42nd series of certificates issued by RB Capital Securitizadora to Ba2 from Baa3, and the national scale ratings to A1.br from Aa1.br. The 31st series of certificates issued by RB Capital Companhia de Securitizacao has also been downgraded to Ba2 from Baa3 (global scale rating) and A1.br from Aa1.br (national scale rating).
  • The ratings of these certificates are primarily based on Petrobras' ability to make payments under the lease agreements, as well as Petrobras' senior unsecured credit risk.
  • Moody's believes that any future changes to Petrobras' senior unsecured debt rating will lead to a change in the ratings assigned to the certificates.
  • Moody's has associated the Ba2 global scale rating with a default frequency over a 3-year investment horizon of 3.80%, up from the Baa3 rating level of 1.37%.
  • Petrobras dominates Brazil's oil and natural gas production, as well as downstream refining and marketing, with an integrated energy business and significant stakes in petrochemicals and sugar-based ethanol production and distribution.
  • The Brazilian government directly and indirectly owns approximately 46% of Petrobras' outstanding capital stock and 60.4% of its voting shares.
  • The principal methodology used in this rating was "Rating Transactions Based on the Credit Substitution Approach: Letter of Credit-backed, Insured and Guaranteed Debts" published in March 2013.

Statistics:

  • Global scale ratings downgraded: 3rd series - Ba2 from Baa3; 4th series - Ba2 from Baa3; 42nd series - Ba2 from Baa3; 31st series - Ba2 from Baa3.
  • National scale ratings downgraded: 3rd series - A1.br from Aa1.br; 4th series - A1.br from Aa1.br; 42nd series - A1.br from Aa1.br; 31st series - A1.br from Aa1.br.
  • Default frequency over a 3-year investment horizon: 3.80% (Ba2) vs. 1.37% (Baa3).
  • Petrobras' total assets: USD 341 billion (as of September 2014).
  • Petrobras' revenue (2020): approximately BRL 1.2 trillion (approximately USD 233 billion).

Sources:

  • Moody's Investors Service, "Rating Action: Moody's reviews ratings of 3rd, 4th and 42nd series of certificates issued by RB Capital Securitizadora and 31st series of certificates issued by RB Capital Companhia de Securitizacao" (memo date 14 Jan 2015).
  • Moody's Investors Service, "Rating Action: Moody's downgrades Petrobras' senior unsecured ratings to Ba2 from Baa3" (memo date 24 Feb 2015).
  • Moody's Investors Service, "Rating Methodology: Rating Transactions Based on the Credit Substitution Approach: Letter of Credit-backed, Insured and Guaranteed Debts" (memo date 22 Mar 2013).
  • Moody's Investors Service, "Credit Policy" (memo date various, last updated 02 Jul 2020).
  • Moody's Investors Service, "Regulatory Disclosures" (memo date 14 Jan 2015).
  • Petrobras' Annual Report (2020).