Bloomberg News

Petrobras Sells $7 Billion of Bonds in Record Brazilian Deal

February 02, 2012

Feb. 1 (Bloomberg) -- Petroleo Brasileiro SA, Brazil’s state-controlled oil producer, sold $7 billion of bonds overseas in the country’s largest corporate debt offering ever.

The issue matched SABMiller Plc’s $7 billion offer last month as the largest sale since March. Petrobras, the biggest emerging-market issuer of overseas debt in 2011, sold $1.25 billion of three-year notes and $1.75 billion of five-year bonds as well as more of its notes maturing in 2021 and 2041, according to data compiled by Bloomberg. The three-year debt priced to yield 275 basis points above similar-maturity U.S. Treasuries while the five-year notes pay 290 basis points more.

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

“There’s a lot of money out there and it’s a credit that people like, people are familiar with, and it’s a blue-chip name,” Su Fei Koo, who helps manage about $850 million in emerging-market debt at Doubleline Capital LP, said in a telephone interview from Los Angeles.

Yields Fall

Petrobras sold $2.75 billion more of its bonds due in 2021 and $1.25 billion more of its securities maturing in 2041 to yield 295 basis points more than Treasuries, Bloomberg data show.

The average yield on investment-grade company debt in emerging markets has fallen 29 basis points, or 0.29 percentage point, over the past two months to 4.94 percent, according to JPMorgan Chase & Co.’s CEMBI Index. Yields on Petrobras’s securities due January 2021 fell one basis point at 3:41 p.m. in New York to 4.65 percent, Bloomberg data show.

Chief Financial Officer Almir Barbassa said in a Jan. 12 interview that Petrobras is seeking to sell a similar amount this year as the $9.6 billion it issued in 2011. The company 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. It last sold international bonds in December, when it offered 700 million pounds of bonds maturing in 2026.

BB Securities, Citigroup Inc., Itau BBA, JPMorgan Chase & Co., Morgan Stanley and Banco Santander managed the sale for Petrobras, according to a person familiar with the transaction who asked not to be identified because he isn’t authorized to speak publicly on the matter.

Petrobras shares gained 1.5 percent to 24.95 reais. The stock is up 16 percent this year, compared with a gain of 14 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. The company missed its 2011 production target because of equipment delays and more regulatory scrutiny after an oil spill in the Gulf of Mexico in 2010.

--With assistance from Veronica Navarro Espinosa, Tim Catts and Drew Benson in New York, Peter Millard in Rio de Janeiro and Gabrielle Coppola in Sao Paulo. Editors: Brendan Walsh, Glenn J. Kalinoski

To contact the reporters on this story: Boris Korby in New York at bkorby1@bloomberg.net; Christine Jenkins in New York at cjenkins28@bloomberg.net

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


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