Petrobras Raising Billions in Capital Again -- at the Lows

Energy

Published: March 10, 2014 2:48 pm

Last Updated: March 11, 2014 6:51 am

Petróleo Brasileiro S.A. (NYSE: PBR), or Petrobras for the rest of us, has embarked upon another large capital raise. While this is nothing compared to its huge equity offering of the past, it is still a large benchmark debt offering and the proceeds are going to be in the billions — some $8.5 billion according to ratings agencies.

The formal issuer is Petrobras Global Finance B.V., and the offerings are unconditionally guaranteed by Petrobras. We have the following sold:

$3 billion in 2017 notes
$2 billion in 2020 notes
$2.5 billion in 2024 notes
and $1 billion in 2044 bonds.

Dow Jones had reported earlier on Monday that the offering would be for at least $3 billion, but then this size was bumped up due to strong demand. The use of proceeds is under the company’s long-term capital expenses. Both S&P and Fitch gave the offering BBB ratings.

It is not all that shocking that Petrobras would get such strong demand for a debt offering. The company has some of the best oil reserves in the world. Still, the debt side may be a better way for some investors to get exposure to Petrobras. Its capital structure simply does not treat its shareholders very well compared to other oil giants.

Petrobras shares were down just over 2.7% at $10.60 in late day trading. This is significant, at least when you consider that the prior 52-week low was $10.63 to $19.65.

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