Petrobras to Offer New Debt, Repurchase Up to $3B in Bonds

Petrobras to Offer New Debt, Repurchase Up to $3B in Bonds
State-controlled Petrobras plans to sell five- and 10-year dollar-denominated bonds as early as Tuesday, the first global offering of bonds by any Brazilian company since last June.

Reuters

SAO PAULO, May 17 (Reuters) - State-controlled Petróleo Brasileiro SA plans to sell five- and 10-year dollar-denominated bonds as early as Tuesday, the first global offering of bonds by any Brazilian company since last June, as the debt-laden Brazilian oil producer seeks to ease repayment risk in coming years.

Rio de Janeiro-based Petrobras announced the offering in a securities filing, alongside a plan to repurchase up to $3 billion of bonds due in 2018. Proceeds from the sale of the senior unsecured notes, which will each bear interest of 9 percent and 9.25 percent, respectively, will be used to fund the buyback.

The new bonds are expected to be rated "B3" by Moody's Investors Service, six levels below investment-grade, two sources with direct knowledge of the deal said.

Until a sweeping corruption scandal unearthed two years ago and a recent slump in oil prices undermined the company's finances, Petrobras for years had a debt rating higher than the Brazilian government's.

The offering is Petrobras's first attempt to sell bonds in global debt markets since June 1, when the company placed $2.5 billion worth of bonds maturing in 2115. The last Brazilian company to sell debt to international investors was planemaker Embraer SA, which sold $1 billion of 10-year bonds on June 8, according to Thomson Reuters data.

Petrobras has about $33 billion in outstanding bonds.

The cost of insuring Petrobras debt against default for five years fell 2 basis points to 740 basis points on Tuesday, according to Markit prices.

The Petrobras offering could help pave the way for other Brazilian companies to raise money from global bond investors, which could benefit from President Dilma Rousseff's ouster and optimism that her replacement may implement more business-friendly policies, Deutsche Bank Securities said this week.

Petrobras, which for years was Rousseff's favorite tool to implement policies that fueled inflation and dragged Brazil into a recession, could benefit most from the change, Deutsche Bank analyst Eduardo Vieira said this week.

Brazil's Senate voted last week to impeach Rousseff and she faces trial on charges of breaking budgetary rules. Vice President Michel Temer has so far announced plans to end Rousseff's budget profligacy and reduce long-term spending.

According to the sources, Petrobras hired the investment-banking unit of Banco do Brasil SA to manage the transaction, alongside those of Bank of America Corp, JPMorgan Chase & Co and Banco Santander SA.

(Editing by W Simon)

Copyright 2016 Thomson Reuters. Click for Restrictions.

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Bob | May. 18, 2016
I have said it for many years now, after traveling in Brazil for business that if they could get the mass corruption out, the country has it all. Oil/Gas, Minerals, Timber. You name it they have it. But corruption keeps the country in poverty. Hopefully, the new regime will improve it but I would not hold my breath.


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