Petrobras Launches Sale of Bonds to Raise $11 Billion

SAO PAULO - Brazilian state-run energy giant Petroleo Brasileiro SA on Monday began its enormous 2013 financing campaign with one of the largest bond issues this year.

Petrobras, as the company is better known, on Monday launched the sale of $11 billion in bonds through six separate sets of bonds, with maturities of between three and 30 years, according to term sheets provided by fund managers.

There was sufficient demand for Petrobras' investment-grade bonds for the firm to have raised up to $40 billion, according to a person with knowledge of the transaction. The total size could still increase, as the company has an option to offer up to 5% more to Asian investors later in the day.

Investors had been preparing for the sale, as Petrobras has stated it aims to borrow about $20 billion this year and a similar amount next year to fund its ambitious $237 billion multi-year investment plan. The company is leading Brazilian efforts to develop huge offshore oil fields known as the pre-salt reserves.

"We reduced our Petrobras exposure significantly earlier this year in expectation of this issue," said Joon Hyuk Heo, head of global fixed income at Mirae Asset Global Investors, with more than $2 billion in emerging-market assets.

Prices on Petrobras' existing bonds have traded around 110 cents to the dollar in recent months from its 2012 high of 115 cents to the dollar--according to MarketAxess BondTicker data--on concerns about fresh supply and the level of government intervention in the company.

Mr. Joon said recent valuation on Petrobras' debt makes the deal attractive, but the longer-term outlook for commodities and Brazilian companies is less of a draw. Mr. Joon said Petrobras had an advantage in issuing floating rate notes, as they were rare and would drive up demand. He planned to buy the five-year tranche of the deal.

Copyright (c) 2012 Dow Jones & Company, Inc.


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