CFO: Petrobras May Sell Euro-Denominated Bonds in 2013

RIO DE JANEIRO - Petroleo Brasileiro could sell a euro-denominated bond in 2013 as part of efforts to raise an additional $9 billion from capital markets this year, Chief Financial Officer Almir Barbassa said in an interview Wednesday.

Petrobras, as the state-run energy company is known, went a long way toward meeting its goal of borrowing $20 billion this year with last week's sale of $11 billion in dollar-denominated bonds, the largest-ever emerging-market deal. The company is tapping global markets to finance development of offshore oil fields.

Mr. Barbassa said that Petrobras won't sell any more U.S. dollar-denominated bonds this year, given that the company limits itself to one deal per currency each year. Mr. Barbassa said that a euro-denominated bond would be "possible" this year, depending on market conditions. "If the market conditions are there, why not?" Mr. Barbassa said, noting that the company sold euro-denominated bonds in 2012. The company also sold a bond in British pounds last year.

The company has also evaluated the sale of bonds denominated in the yuan or yen, but the two markets don't offer the same scale as other regions, Mr. Barbassa said.

Mr. Barbassa said some of the remaining funds could be raised in Brazil. The Brazilian National Development Bank, or BNDES, is an "important" source of funding that is always on the company's radar, Mr. Barbassa said. Petrobras may also sell securities backed by rent on the company's real estate, called CRIs, in small amounts of between 500 million and 600 million Brazilian reais ($245 million and $294 million), the executive added.

Despite Petrobras's struggles to boost crude-oil production over the past year, recent increases in domestic gasoline and diesel fuel prices have caused an important shift in investor sentiment, Mr. Barbassa said. That was underscored by heavy demand for last week's bond sale and an upswing in the company's shares, which are up 15% over the past three months.

"It's not just the demand that is important, but the quality of the demand," Mr. Barbassa said of last week's bond sale, which was estimated to have been 4.5 times subscribed. Petrobras estimates that it could have raised between $18 billion and $20 billion from the sale, but was committed to selling a maximum $11 billion, Mr. Barbassa said.

The bond sale was dominated by U.S.-based mutual funds, with the American investors buying up about 73% of the offer, Mr. Barbassa said. European investors purchased 17%, while Asian investors snapped up 7% and Latin American investors the remaining 3%.

Petrobras's $237 billion investment plan calls for the company to raise $101 billion from global financial markets over the next five years. The majority of the financing, however, will come over the next few years, Mr. Barbassa said.

"In 2016, we should be a company with positive free cash flow, so debt raising will not be done at the same velocity as today," Mr. Barbassa said.


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