The plan entails buying back 91.5 million non-voting shares over the coming year to adjust cash flow and capital structure. The shares likely will be written off once bought, said Barbassa.
"The idea is to seek ways to improve the return of the reserves," he said in a telephone interview. "It's a good investment since the non-voting right shares are valued under what we consider their fair value."
The transaction also is designed to improve Petrobras' capital structure, he added. Petrobras has hired 10 banks to intermediate the transaction.
Petrobras has 1.85 billion non-voting shares, of which 14.2% are in the hands of small-scale investors in Brazil and abroad as depositary receipts and another 36.2% are traded on the NYSE as ADRs.
Petrobras generated roughly 136bn reais (US$63bn) in net revenues last year and total indebtedness stood at some 44bn reais at the end of September 2006. Of that, some 32.3bn reais is maturing in 12 months and the rest is short term.
At the end of September 2005, the company's total debt stood at 47.4bn reais. The company in July concluded a US$1bn debt buyback operation. Cash reserves stood at 24.5bn reais at the end of September 2006.
But Petrobras has been parsimonious about tapping financial markets despite its access to bank financing in Brazil and abroad.
Main operations this year were aimed at sustaining a presence in capital markets rather than raising cash, Barbassa said. In fact, the company plans to raise only US$400mn to finance its US$87bn, 2007-11 investment program.
This puts Petrobras in quite a comfortable situation since its indebtedness level is equivalent to some 17% of its net worth, Barbassa said.
But the company now plans to look more towards capital markets.
"The 17% is low and our ceiling is 25-35%," said Barbassa.
Although the company does not need to raise cash on financial markets for its normal operations, it will do so for specific projects where financing can be performed at a lower cost, he said.
At least one specific operation is being looked at for 2007 which will be used to finance investments in real estate.
"We are building our [regional] headquarters in Macae [Rio de Janeiro] and Vitoria [in Espirito Santo] and are building a dry dock in southern Brazil," Barbassa said.
The idea is for companies carrying out the projects to sell receivables from the 10-12-year lease that Petrobras will pay for the use of the buildings.
"At the end of the lease period, Petrobras will have the option to buy the buildings," he added.
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