Moody’s Investors Service downgraded Petrobras’ debt rating on Wednesday, the second time this year the debt-plagued company has seen its rating fall.

Moody’s doubled down on its junk rating for the company and lowered Petrobras’ rating from Ba2 to Ba3, with negative outlook.

Moody’s cited depressed energy industry conditions, a “high execution risk” for the company’s plans to divest from $15.1 billion in assets by the end of 2016, a high level of debt maturities in the coming years and the prospects of negative cash flow as reasons behind the downgrade.

According to Retuers, Petrobras has only sold 3 percent of the assets it intends to divest from and the largest of those sales is now facing a court challenge.

“Free cash flow will remain negative in the foreseeable future as international oil prices remain weak, even though downstream losses are limited by stable local prices for oil products; further local currency devaluation is another significant risk to downstream results,” VP-Sr. Credit Officer at Moody’s Investors Service Nymia Almeid said.

The ongoing corruption probe into Petrobras contracts, known as Operation Car Wash, and the possibility of losses and fines tied to the investigation also prompted the rating slide.

Moody’s said Petrobras’ b3 BCA and Ba3 ratings are supported by the company’s large-scale reserve base, its dominance in Brazil’s oil sector and the potential for long-term production growth.

Moody’s added that it has also put Petrobras in review for another potential downgrade.

The review will focus on the ability and willingness of the Brazilian government to provide Petrobras with “adequate timely support in case of need.”

While Brazil’s government has said it stands behind Petrobras, a weak economy and a turbulent political situation may prevent the government from “from fully supporting Petrobras to avoid a default,” Moody’s said.

“As a consequence, the current assumption of high support could decline and the number of notches uplift from Petrobras’ b3 BCA could also decline,” Moody’s added.

The Brazilian Supreme Court suspended impeachment proceedings against president CEO Dilma Rousseff on Wednesday until it rules on the validity of a secret congressional ballot tied to the effort, Retuers said.

Rousseff, the former CEO of Petrobras, has not been implicated in the corruption scandal that has rocked her former firm.

However, members of her ruling Workers’ Party, including Senator Delcídio do Amaral, have been charged with involvement in the price-fixing and graft scheme.


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