Petrobras Pumps Banks for Funds

Amid plans to significantly boost investment, Brazilian energy behemoth Petrobras is looking to raise at least $6bn in bilateral loans from international banks, say people familiar with the process. The company has in the past several days initiated discussions with lenders to try and raise the sum through as few institutions as possible, though it is heard to have cast a wide net in search of willing participants. Petrobras was heard originally seeking to raise the funds with just three banks, for $2bn each. But the borrower is now apparently entertaining talks for facilities of $500m-$1bn in size. Bankers familiar with the discussions say the borrower is getting proposals of Libor plus 300bp for 2 years and also considering facilities of 18 months. With Libor recently at a 6-year low, the all-in cost of such a facility today would stand at around 4%. Petrobras is heard to have homed in on institutions with large balance sheets and some DCM capabilities. The plan, say bankers, is to term out bond debt coming due in the next 2 years. HSBC, Santander, RBS and Barclays are among those being approached, say people away from those shops. Some syndication executives express discomfort with Petrobras’ strategy of raising funds through simultaneous bilats rather than syndication. The problem is getting a credit committee comfortable signing onto a deal at terms that may end up less favorable than a similarly-sized facility with another institution. Committees would request “most favored nation” clauses, which ensure the same terms as other like facilities if they are more creditor-friendly. But enforcing that on a series of bilats is challenging. Petrobras has historically preferred the leverage it exerts on a lender through bilateral discussion, say bankers. They warn, however, that since markets turned against borrowers, deals must make economic sense to be approved. Petrobras said late Friday it will invest $174.4bn in 2009-2013, including $28.6bn this year, according t