Petrobras Completes Diversification Play

By pricing GBP700m ($1.1bn) 2026 bond Monday, Petrobras wrapped up its foray into the European market as it looks to expand its funding base and ease pressures on its core funding base. Bankers agree that the Brazilian oil company paid a premium to its dollar curve, but access to new pools of funding is seen as vital for a credit that needs to cover massive capex needs over the coming years, and the extra cost was probably worth the trouble, say some bankers. “You could say looking at comps in the euro markets that it was normal pricing, but versus the dollar curve they paid a decent new issue concession to access a different set of investors,” says one rival syndicate official. Still, in the end, it was able to raise $1bn equivalent with a lengthy 15-year tenor. Exactly how much the oil company would have paid to make a similar trade in the USD sector was a question for debate, but most bankers agreed that the 295bp G-spread seen on the company’s USD 2021s was the main starting point. In all, Petrobras placed the paper with about 100 investors, few of which were traditional buyers of the credit, namely large pension and insurance companies, with banks largely selling the deal off their high-grade desks. Demand topped the GBP1bn mark before the bond was priced at 97.876 with a 6.25% coupon to yield 6.379% or Gilts plus 370bps. Some cross-over US accounts were also seen nibbling at the edges seeing the trade as a yield play. “They can now come back in 2012 and do a decent size in dollars, so it makes a lot of sense [to tap euros and sterling],” says another senior banker away from the deal. “It may be more expensive, but what would have happened to their dollar spreads if they did everything in dollars?” This comes less than a week after the oil company tapped the euro market for $2.5bn equivalent with EUR1.25bn 6-year priced at 99.021 with a 4.875% coupon to yield mid-swaps plus 285bp, and a smaller EUR600m 10-year that came at 99.266 with a 5.875% coupon at MS+330b