The Looming Problem for Petrobras That Could Kill Your Investment

If debt was already a problem looming for Petrobras, Standard & Poor's downgrade of Brazil credit will only make matters worse.

Mar 27, 2014 at 2:30PM

There are few oil companies out there that are willing to spend as much money as Petrobras (NYSE:PBR) right now. The company's ambitious plans to double production capacity by the end of the decade will take lots of money, and it has taken on a very sizable debt load in comparison to peers BP (NYSE:BP) and ExxonMobil (NYSE:XOM). This week, Standard & Poor's downgraded Brazil's credit rating, and that will have a direct effect on Petrobras' finances.

Interest rates on Petrobras' debt, which is mostly based on Brazil's floating long-term interest rate, are likely to climb following this news. Unfortunately for Petrobras, this is not the only debt problem it has to worry about. Watch the video below to find out what other debt specters are lurking that could sting Petrobras investors. 

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Tyler Crowe has no position in any stocks mentioned. You can follow him at Fool.com under the handle TMFDirtyBird, on Google+, or on Twitter @TylerCroweFool.

The Motley Fool recommends Chevron and Petroleo Brasileiro S.A. (ADR). Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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