* Debt heading to 3.5 times EBITDA
* Low Brazil fuel prices hurting firm
SAO PAULO Feb 9 The chief executive of Brazil's
state-led oil company Petroleo Brasileiro SA warned
the government about rising debt levels that may jeopardize the
firm's investment grade credit rating, a Sao Paulo newspaper
reported on Saturday.
Without higher fuel prices in Brazil, Petrobras' debt will
rise well above its internal target, Chief Executive Maria das
Graças Foster said in a meeting with Brazil's Finance Minister
Guido Mantega, according to Estado de Sao Paulo newspaper.
She told him last week that debt could reach 3.5 times
earnings before interest, taxes, depreciation and amortization,
or EBITDA, by the fourth quarter of this year, according to an
anonymous source cited by the paper.
Petrobras did not immediately respond to phone calls and an
emailed request for confirmation.
The firm's debt has already risen to 2.77 times EBITDA,
above its internal limit of 2.5 times core profit. Moody's
Investors service put Petrobras debt on watch for a possible
downgrade on Dec. 18.
A credit rating below investment grade would oblige
international funds to abandon Petrobras when Graças Foster has
promised to find savings of more than $15 billion to prevent a
$237 billion five-year investment plan from ballooning.
Petrobras cash generation has been squeezed in recent years
as the government, which owns a majority of voting shares,
prevented the company from raising fuel prices in line with
world prices. The government has held prices in check to help
Finance Minister Mantega, who is also chairman of the
Petrobras board, ruled out higher fuel prices for the time being
since the government raised prices on Jan. 30.
(Reporting by Caroline Stauffer; Editing by Vicki Allen)