Petrobras in $8.5bn bond sale

Petrobras11 March 2014, News Wires – Petrobras has announced another mega-bond offering to the tune of $8.5 billion, lining up needed capital for its challenging pre-salt field development but raising concerns about the company’s still-increasing debt load.

The company will issue fixed and floating rate notes coming due in 2017, 2020, 2024 and 2044 with coupon rates ranging from 3.25% to 7.3%, it said in a securities filing late Monday.

Data from Bloomberg indicated it was the largest bond sale thus far of 2014.

Investors have expressed concern over the company’s indebtedness, but Petrobras maintains the load is manageable and part of its business and management plan for 2014 to 2018.

During that time “Petrobras will raise US$ 60.5 billion of gross debt and have US$ 54.9 billion of amortizations, resulting in incremental net debt of US$ 5.6 billion for the period,” the company said late Monday in a securities filing.

Company shares were off 1.08% in New York Tuesday morning.

The company has laid out an ambitious $220.6 billion investment plan for 2014-2018 as the company looks to harness major pre-salt reserves to boost production to 4.2 million barrels per day by 2020 from about 2.5 million presently.

But Petrobras revenues and cash flow are routinely squeezed by fuel price controls in Brazil, which has put pressure on the company’s international credit rating but still maintained its investment grade.

Wire reports indicated the Standard & Poors agency rated the new bonds BBB.

Last May the company sold $11 billion in three to 30-year bonds in what was then the largest debt offering by a Latin American company.

But Petrobras paid less on interest for its 2012 offering, with coupons ranging from 2.14% for three-year fixed rate notes to 5.76% for the 30-year notes.

The 2014 bond offering includes $1.6 billion in fixed three-year notes at 3.25% and $1.4 billion in floating three-year notes at the three-month Libor plus 236 basis points.

Due in 2020 are $1.5 billion in fixed six-year notes at 4.875% and $500 million in floating six-year notes at three-month month at the US Libor rate plus 288 basis points.

Due in 2024 are $2.5 billion in fixed notes with a 6.25% coupon and $1 billion in 2044 notes with a 7.25% coupon.


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