Suspension of the divestment program has been asked to carry out until the court reviews the disposition procedures and policies of the company
As if the depleted crude oil environment and aftermath of the corruption scandal was not disgraceful enough for Petroleo Brasileiro SA Petrobras (ADR)(NYSE:PBR), the latest trouble which hits the Brazilian oil producer are the orders by the country’s federal auditing court (TCU) on Wednesday.
The court has asked the company to halt its asset sale program for now. Suspension of the divestment program has been asked to carry out until the court reviews the disposition procedures and policies of the company. The latest move is the latest addition to the company that is striving hard to deleverage its financial profile. Plunging energy prices accompanied by the worst massacre of corruption that shook the Brazilian economy led Petrobras to become the largest indebted company globally.
Through the suspension of the divestiture program, efforts by the company to raise around $15.1 billion from dispositions by the end of this year would be highly hampered. In addition, the suspension of the program would also adversely affect the total sales target of $19.5 billion more in the next two years.
According to the court orders, around five asset divestments that are about to complete are allowed to be finalized. However, the company has to avoid signing any more divestment plans “until a new order” gets issued. Any set timing for the issuance of new order has not been disclosed yet.
Describing the court orders as “positive,” the Brazilian oil company stated that it will fully adhere to the court orders. Decision by the court comes ahead of suggestions by experts regarding procedures used by the company for divestments.
As per the court decisions, the company, as a state owned utility, shall observe a greater degree of transparency in its asset sale program. It is not new that regulations for publicly listed company in Brazil require sufficient disclosure of business procedures.