Year: 2021

Winner: Petrobras Liability Management Program

Petrobras has worked hard to improve its debt profile in recent years – and a flurry of activity over the past year secured the Brazilian oil giant’s win for Corporate Liability Management of the Year.

By taking advantage of volatile markets and working tirelessly both with trading desk daily operations and large bond issuances, Petrobras managed to further extend the duration of its debt while reducing the principal to more manageable levels.

CFO Rodrigo Araújo notes that Petrobras closed the third quarter of 2021 with $60 billion worth of debt – a level the company deems optimal level for its operations. In 2015, that number was $160 billion. Annual interest payments dropped from $8 billion a year, posted at the peak of the company’s indebtedness, to around $1.5 billion.

The average duration of Petrobras’ debt was extended by more than two years, reaching almost 14 years, close to the estimated period of maturation of investments in oil and gas projects, Araújo says.

“There was much volatility last year, and again in 2022. So our trading desk is ready to identify windows of opportunity to repurchase bonds,” Araújo tells LatinFinance.

In 2021, Petrobras’ OMR team bought back $3.8 billion in bonds by paying close attention to market trends and identifying bondholders looking to sell their holdings. It also bought back almost $4 billion in debt in the capital markets, while issuing $3.6 billion in bonds to help fund debt replacement efforts.

One of the two bonds issued by Petrobras in 2021 was a 30-year, $1.5 billion note for which the company paid its lowest ever coupon for that duration, Araújo points out. The note will pay 5.75% a year until 2051 and was several times oversubscribed, according to the CFO.

“It was an important landmark in terms of debt replacement for the company. We have been able to make issuances at costs equivalents to investment grade,” he says. “By the end of the year, we pre-paid $16.6 billion of debt, while issuing $1.5 of new debt. It was a very active year in terms of liability management.”

The market has become more cautious in recent months, but Araújo says that Petrobras will remain vigilant for opportunities to optimize its debt profile. It could even issue new securities in the capital markets over the coming year, though the size of such issuance is likely smaller than in 2021.

“When we talk about smaller deals for Petrobras, it may still be something like $1.5 billion,” Araújo says. – LF