Bloomberg News

Petrobras Will Hold Off Dollar Bond Sales, Studies Yen Offer

February 14, 2012

(Updates share price in last paragraph.)

Feb. 8 (Bloomberg) -- Petroleo Brasileiro SA, Latin America’s largest company by market value, will wait until next year to sell dollar bonds to avoid flooding the market as it studies a sale in yen.

Petrobras, as the Rio de Janeiro-based producer is known, will wait until late 2012 before possibly selling more bonds in euros, Chief Financial Officer Almir Barbassa said in a telephone interview yesterday from Rio de Janeiro. Petrobras sold a record $7 billion in dollar bonds last week after selling a combined $3.5 billion in euro and pounds in December.

“We just did a large operation in the European market,” Barbassa said. “We’re not going to do a small operation. To return, it has to be a big one, so we need to create the conditions.”

Petrobras, Brazil’s state-controlled oil producer, plans to borrow as much as $18 billion a year through 2015, mainly from international markets, to more than double production by 2020 and develop the largest oil discoveries in the Americas in more than three decades.

The company’s Feb. 1 sale of dollar debt matched SABMiller Plc’s $7 billion offering last month as the largest dollar- denominated corporate bond issue this year, according to data compiled by Bloomberg. Demand surpassed $25 billion as investors sought alternatives to European assets and lower-yielding investment-grade debt, allowing Petrobras to sell at record-low borrowing costs, the company said Jan. 6.

‘Out of the Market’

“If they do issuances too frequently, they won’t get $25 billion in demand as they did last time,” Klaus Spielkamp, a fixed-income trader at Bulltick Capital Markets in Miami, said in a telephone interview yesterday. “They’d rather do a big issuance and then stay out of the market. They may do some issuances in Swiss Francs or yens later this year but it would be something small.”

Petrobras issued 700 million pounds ($1.1 billion) of bonds due 2026 on Dec. 5, four days after selling 1.85 billion euros ($2.4 billion) of debt maturing in 2018 and 2022 to help finance its five-year $224.7 billion investment plan..

The company’s A3 rating from Moody’s Investors Service, four steps above junk, will help it sell bonds to Japanese investors, Barbassa said. Petrobras is rated BBB by Standard & Poor’s and Fitch Ratings, the second-lowest investment-grade level. Petrobras hasn’t sold yen bonds since 2006, according to data compiled by Bloomberg.

Deepwater Drilling

“It was a market more for companies rated A, A+, and it is changing,” Barbassa said. “We have a rating from Moody’s in this category. The market could open up for us, we’re watching.”

Petrobras will continue borrowing from private and state- run banks this year as it boosts spending on the drilling rigs and platforms it needs to find and produce oil in waters as deep as 2,800 meters (9,186 feet), Barbassa said. The company borrowed $18 billion last year, including about $10 billion in bonds, he said.

Petrobras fell 0.7 percent to 25.43 reais in Sao Paulo. The stock has climbed 18 percent this year, more than the 16 percent increase in Brazil’s benchmark Bovespa Index.

--With assistance from Juan Pablo Spinetto in Rio de Janeiro. Editors: Robin Saponar, Charles Siler

To contact the reporter on this story: Peter Millard in Rio de Janeiro at

To contact the editor responsible for this story: Dale Crofts at

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