Petrobras to Engage European Accounts

Petrobras will start fixed-income investor meetings in Europe this week, joining a string of other EM issuers testing sentiment for potential international deals in December. This comes at a time when concerns over the Continent’s debt crisis continue to intensify, making some borrowers believe that they perhaps should quickly tap funding before the situation worsens rather than wait for the traditional January rush. Still, the Brazilian oil company faces tough conditions in what is the epicenter of global volatility these days, though it may be able to garner interest from European accounts seeking high quality EM names and diversification away from credits at home. Should investors be receptive, Petrobras may well move ahead with what will be debut in euros and sterling, following in the wake of a similar and successful dual-tranche offering sold by Mexican telecom America Movil earlier this year. However, it remains a matter for debate whether Petrobras is willing to pay the price for diversifying its funding base at time when European issuers have been seeing new issue premiums in the 40-50bp range. That is well above the 10-15bp maximum Petrobras CFO Almir Barbassa told LatinFinance he was willing to pay. Still AMX faced similar stumbling blocks and was able to achieve satisfactory pricing by focusing instead on relative value, looking at where AMX historically traded against Europeans peers and trying to price inside those levels. Petrobras management is splitting into 3 teams and has mandated BB Securities, Bradesco, Credit Agricole, Deutsche Bank, HSBC and Santander to help engage with the European buyside. It will be in Paris and the Netherlands on Monday, in London, Edinburgh and Switzerland on Tuesday and in Germany and London again on Wednesday.