Petrobras Contractor Drills for Loan

Etesco, the Brazilian Petrobras contractor, is heard to be weeks away from wrapping up a $700m debt financing for the construction and operation of a new offshore drilling platform. The company and its co-sponsors, which include Mitsui and Nippon Steel, have locked in some $300m in commitments from ECAs, including Norway’s GIEK and Export Finance. Commercial lenders Bank of Tokyo Mitsubishi, Mizuho, Sumitomo Mitsui and ING are heard to be close to tying up a $400m 9-year facility for the deal, whose terms, including margins, were originally agreed upon in the summer of 2008. The deal, being done on a club basis, is heard to have been promised to the borrower starting at around 200bp-250bp and stepping up from there, presumably another 100bp, say bankers. But at those levels, the transaction would be substantially below today’s market and barely above some banks’ funding costs. One existing reference is AES Gener’s Campiche, a financing with similar a tenor and risk profile that was launched to a limited group this month. Campiche starts at 350bp over Libor and moves up to 450bp in year 10, well above what Etesco was originally offered. But one executive involved in Etesco says he believes that original level will have to be adjusted upwards, a fact that is unlikely please the project’s co-sponsors. The trouble for many contractors is that rising costs of capital are squeezing out the returns forecasted in the financial models they have built for their concessions. Odebrecht, which is looking for $1.3bn in debt financing for its twin platforms, appears to be at odds with its bankers on where to price its facility, say people away from the process. The impact on project’s viability is among its chief concerns, they cite the company as saying. Etesco is targeting an end of March close for its debt financing.