Petrobras Said to Plan $2.5 Billion 100-Year Bond Offering

(Bloomberg) -- Petroleo Brasileiro SA is selling $2.5 billion of 100-year bonds, returning to overseas capital markets for the first time since the emergence of a bribery scandal at the state-controlled oil company.

Petrobras is seeking to issue securities due in 2115 to yield 8.45 percent, said a person familiar with the matter who isn’t authorized to speak publicly and asked not to be identified. That is 0.4 percentage point lower than the initial price guidance from bankers earlier Monday.

The move reflects pent-up financing needs for a company that’s been shut out of the bond market since November, when a probe into executives who allegedly took bribes in return for billions of dollars of contracts caused borrowing costs to soar to a record. Petrobras’s notes have recovered in recent months after the producer delivered long-delayed audited financial results in April and replaced its chief executive officer.

“Petrobras successfully put what perhaps was the most spiny issue behind them when they issued their 3Q and 4Q14 audited financials,” Rafael Elias, a Latin America debt strategist at Credit Agricole, said in an e-mailed note to clients. “Bond will seem too attractive to pass for many.”

Petrobras, which would be the first emerging-market company to sell 100-year notes since 1997, is seeking to join Mexico in issuing so-called century bonds. Mexico has sold 100-year bonds abroad on five occasions since 2010 in three different currencies, raising almost $6 billion all together.

‘Seems Expensive’

Mexico’s $2.67 billion of dollar-denominated notes due 2110 yield 5.58 percent, data compiled by Bloomberg show. The country is rated two levels higher than Petrobras by Standard & Poor’s and five steps above by Moody’s Investors Service. Petrobras’s grade was cut to junk by Moody’s in February because of delays in releasing its audited financial results.

Petrobras’s longest-dated dollar bond matures in 2044 and yields 7.58 percent, data compiled by Bloomberg show. While that’s down one percentage point from a record high March 17, it’s still well above the 5.9 percent low it reached in August.

Deutsche Bank AG and JPMorgan & Chase Co. are bookrunners on the deal, and the proceeds will be used for general corporate purposes, the person said.

Corruption Writedown

Petrobras’s press office didn’t reply to an e-mail and phone call seeking comment on the bond sale.

Petrobras, the most-indebted global oil company with $133 billion in obligations, is struggling to reduce leverage and boost production in deep waters amid a slump in oil prices.

On April 22, the company ended a five-month delay in releasing audited financial results, reporting a corruption- linked writedown of 6.2 billion reais ($2 billion) and a 44.6 billion real impairment, mainly from overpriced and unfinished refinery projects.

The oil producer has relied on financing from Brazilian and Chinese banks this year, raising $9.6 billion from such lenders.

In the local market, Petrobras is seeking to raise 3 billion reais through infrastructure bonds, a person familiar with the matter said last month. The amount raised could reach 4 billion reais with an additional allotment, said the person, who asked not to be identified because the plans haven’t been made public.

--With assistance from Juan Pablo Spinetto in Rio de Janeiro, Allan Lopez in New York and Sebastian Boyd in Santiago.

To contact the reporters on this story: Filipe Pacheco in Sao Paulo at; Paula Sambo in Sao Paulo at To contact the editors responsible for this story: Brendan Walsh at Dennis Fitzgerald, Rita Nazareth


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