Petrobras to Pay $2.95bn, Denies Guilt
State-owned Petrobras has signed an agreement in principle to settle the securities class action lawsuit filed in the US District Court for the Southern District of New York, while not admitting guilt.
According to Zacks Equity Research, the Brazilian company's settlement, "which came at a lower cost and sooner than expected, is an important achievement for the company as it tries to emerge from the bribery case which had involved various corporate executives and political figures. The agreement also seeks to remove uncertainty regarding Petrobras' liabilities, enabling it to better plan how it uses the future cash flow."
Petrobras has signed a number of strategic alliances with the majors over the last year or so, including Norwegian Statoil, which last month agreed to pay $2.9bn – almost exactly the amount of the settlement – for a stake in the large Roncador field offshore Brazil. During autumn 2017 it also put smaller upstream assets in Nigeria and Paraguay up for sale.
The agreement, which is subject to approval by the court, is intended to resolve all pending and prospective claims by purchasers of Petrobras securities in the US and by purchasers of Petrobras securities that are listed for trading in the US, it said January 3. It eliminates the risk of an adverse judgment which, as Petrobras has previously reported, could have a material adverse effect on the company and its financial situation, and puts an end to the uncertainties, burdens and costs of protracted litigation.
Petrobras will pay $2.95bn to resolve claims in three roughly equal instalments, the first within 10 days of preliminary approval of the settlement by the court and the second within 10 days of final approval of the settlement. The third installment will be paid either six months after final approval, or January 15, 2019, depending on which is later. The total settlement amount will be recognised in 4Q 2017.
The agreement does not constitute any admission of wrongdoing or misconduct by Petrobras, it said. "This reflects its status as a victim of the acts uncovered by Operation Car Wash, as recognised by Brazilian authorities including the Brazilian Supreme Court. As a victim of the scheme, Petrobras has already recovered reals 1.475bn ($457mn) in restitution in Brazil and will continue to pursue all available legal remedies from culpable companies and individuals.
"The agreement is in the company’s best interest and that of its shareholders, given the risks of a verdict advised by a jury, particularities of US procedure and securities laws, as well its assessment of the status of the class action and the nature of such litigation in the US, where only about 0.3% of securities-related class actions proceed to trial, Petrobras said.