June 5, 2019 / 10:23 PM / 14 days ago

UPDATE 1-Brazil court ruling affecting Petrobras sales pushed to Thursday

(Adds context and detail on STF ruling)

By Ricardo Brito

BRASILIA, June 5 (Reuters) - Brazil’s Supreme Court on Wednesday postponed a decision on whether asset sales by state companies require authorization by Congress, pushing to Thursday a ruling with major implications for the divestment plans of state-run oil company Petroleo Brasileiro SA, or Petrobras.

Four justices had cast votes on the matter before the suspension, with two ruling that congressional approval was not required and two ruling that it was required. The two who decided in favor of divestments passing through Congress had previously ruled in a similar fashion, and their Wednesday decisions had been widely expected.

Reuters reported earlier on Wednesday that Petrobras expects the Supreme Court to narrowly allow it to proceed with asset sales.

In June 2018, Supreme Court Minister Ricardo Lewandowski issued a preliminary opinion saying the “sale of shares in public companies, of mixed capital firms and of subsidiaries requires previous legislative authorization.”

However, key asset sales later got the go-ahead from Brazil’s slightly lower Supreme Judicial Court, or STJ, and from Brazil’s solicitor-general.

Last month, another Supreme Court (STF) minister, Edson Fachin, issued a decision upholding Lewandowski’s opinion, calling the STJ decision contradictory. That decision was issued in response to a lawsuit brought by a union, irked by Petrobras’ TAG gas pipeline unit, which it agreed to sell to France’s Engie SA in April for $8.6 billion.

The eventual decision will have repercussions on the TAG divestment and also on Petrobras’ upcoming divestments, which are likely to be affected given their similarities to the TAG sale.

Since last week, Petrobras representatives and the government of far-right President Jair Bolsonaro have engaged in a full court press with STF ministers in the hope of getting a favorable court decision.

A loss would be a significant setback to the Bolsonaro administration, which has pledged to trim back the role of government-run firms through a privatization program. It would also be a major blow to Petrobras, which is seeking to use asset sales to trim net debt of 372.2 billion reais ($96.3 billion). (Reporting by Ricardo Brito Writing by Gabriel Stargardter and Gram Slattery Editing by James Dalgleish)

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