Colombia Oil Firm Plans Debt Bonanza

Colombian state oil company Ecopetrol says it plans to sell up to $8.1bn in bonds, its first public debt placement for over 10 years. Issuance could happen in the international or domestic markets, and proceeds are earmarked for funding investments over the next three years. “The value of the company would be optimized with debt,” Julio Torres, a former head of Colombian public credit and ex-Ecopetrol board member, tells LatinFinance. Torres, whose firm Nexus focuses on infrastructure advisory, adds that, in addition to funding investment, Ecopetrol could also pay dividends to shareholders, thus providing the government with income. The company has no financial debt, according to Fitch, which rates Ecopetrol BB+, in line with the sovereign. Torres says a sizeable international bond issue would be possible this year if the right window opens up, though he adds that the company has a lot of cash and is not in desperate need of funds. The ex-banker notes recent successful deals from state oil companies Petrobras and Pemex, and also a $1bn issue of 7.375% 2019 bonds sold by Colombia that drew $3bn in demand. Ecopetrol said late last year that by the end of 2009, it may try to get up to $1bn in financing. However, besides the fact that that it would be bringing a maiden issue with no reference point, credit markets remain extremely hostile – especially to high yield – and the oil price is little help. Ecopetrol does not indicate timing for issuance. It plans to invest some $60bn between 2009-2015 in exploration, extraction and other activities. Ecopetrol is 89.9% owned by the Colombian government. Its blowout October 2007 local equity issue raised more than $3.3bn equivalent, but an international placement was put on ice. Bancolombia led the local offering and Credit Suisse and JPMorgan were slated for the international portion. Merrill Lynch and Citi were valuation advisors.