Bloomberg News

Petrobras to Issue About $6 Billion of Bonds Overseas

February 01, 2012

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Jan. 31 (Bloomberg) -- Petroleo Brasileiro SA, Brazil’s state-controlled oil producer, plans to sell about $6 billion of dollar-denominated bonds, matching last year’s record offering.

Petrobras, the biggest emerging-market issuer of overseas debt in 2011, plans to sell new three- and five-year debt while issuing more of its bonds maturing in 2021 and 2041 as soon as tomorrow, according to a person familiar with the plan. The three-year debt may yield about 280 basis points above similar- maturity U.S. Treasuries while the five-year notes may yield 295 basis points more, said the person, who asked not to be identified because terms aren’t set.

Petrobras is raising funds outside of Brazil to help finance $224.7 billion of investments in the five years through 2015 and more than double output by 2020. The Rio de Janeiro- based company sold $6 billion of notes in last January in the country’s largest-ever debt sale. Petrobras also sold bonds in euros and pounds last year, raising about $9.6 billion in international capital markets in 2011, according to data compiled by Bloomberg.

‘Execution Risk’

“Petrobras is a very well known name, a benchmark name, and the markets are doing well with a lot of inflows, so there’s no reason it shouldn’t do well provided the company’s not too aggressive on the pricing,” said Paul Marty, an analyst at Spread Research.

The company may sell about $6 billion in dollar bonds, Fitch Ratings said in a report today. A Petrobras official in Rio de Janeiro declined to comment.

Petrobras may sell the bonds due in 2021 and 2041 to yield about 300 basis points more than Treasuries, the person said.

The average yield of investment-grade companies in emerging markets has fallen 31 basis points, or 0.31 percentage point, over the past two months to 4.92 percent, according to a JPMorgan Chase & Co.’s CEMBI Index. Yields on Petrobras’s securities due January 2021 climbed one basis point today to 4.66 percent, Bloomberg data show.

Petrobras is rated A3 by Moody’s Investors Service, four steps above junk, and BBB by Standard & Poor’s and Fitch Ratings, the second lowest level of investment grade.

BB Securities, Citigroup Inc., Itau BBA, JPMorgan Chase & Co., Morgan Stanley and Banco Santander are managing the sale for Petrobras, said the person familiar with the company’s plans.

The company’s shares were unchanged today at 24.57 reais. The stock is up 14 percent this year, compared with a gain of 11 percent for Brazil’s benchmark Bovespa index.

Petrobras announced Jan. 23 plans to name Maria das Gracas Foster to replace Chief Executive Officer Jose Sergio Gabrielli.

--With assistance from Drew Benson in New York. Editors: Brendan Walsh, David Papadopoulos

To contact the reporter on this story: Boris Korby in New York at bkorby1@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net


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