Petrobras Pays $2.95 Billion to Settle “Car Wash” Case

Brazil’s Petrobras has agreed to pay $2.95 billion to settle a class-action lawsuit in the US relating to the “car wash” scandal that erupted in 2014. The settlement is said to be the biggest such payout in the US by a foreign organization.

The agreement, which has yet to be approved by the court in the Southern District of New York, would resolve all pending and prospective claims by holders of Petrobras securities in the US or securities which were listed for trading in the US. The company has already settled other related lawsuits from investors that opted out of the class action.

Under the proposed deal, Petrobras will pay two installments of $983 million and a third of $984 million. The first installment will be paid within 10 days of the court’s preliminary approval, with the second due within 10 days of the settlement’s final approval. The third installment will be paid six months after final approval or on Jan. 15, 2019, whichever is later.

The scandal centered on bribes paid to former Petrobras directors and politicians by construction companies and others in return for lucrative contracts. Petrobras, however, has denied any wrongdoing and said that it will continue to pursue all available legal remedies from culpable companies and individuals, adding that so far, it has recovered nearly 1.5 billion Real ($457 million) in Brazil as restitution.

Analysts reacted positively to the deal, having largely expected a settlement of more than $5 billion. In a client note, US investment bank JPMorgan said the agreement had put an end to extremely high uncertainty about the potential liability for Petrobras.

Moody’s ratings agency added that the Brazilian group’s liquidity position was adequate and the settlement figure was not a material concern.