On Monday, Brazil’s powerhouse state-run energy firm Petroleo Brasileiro SA (Petrobras) unloaded $11 billion of global debt in what’s been reported as the largest bond offering by a Latin American company in history. The deal was split six ways, with maturities ranging from 3 to 30 years, of both fixed-rate debt and floating-rate debt. According to inside sources, investors made bids as high as $50 billion for the bonds, demonstrating a strong demand for these types of high-rated emerging market companies.
Petrobras confirmed that it has already received more than half of its $20 billion goal this year, which will be slated for investment in oil production and expanded exploration in the near future. The Brazilian oil firm also announced it has plans on spending $237 billion over the next four years in what many analysts say will be the largest corporate investment plan by a single company in the world.
The last time Petrobras sold debt, in February 2012, the company raised $7 billion, which by all standards was still a significant achievement. They did this by offering bonds comprised of four different maturities, in a similar spit as their most recent venture this Monday. With this move, timing is everything. Petrobras is also expected to participate in a Brazilian oil and natural gas rights auction later this week, putting it in a great position after Monday’s bond sale.
This latest deal was facilitated on a massive scale by many of the world’s top financial institutions, including the Bank of America Corp., Banco do Brasil SA, Citigroup Inc., HSBC Holdings PLC, Itaú Unibanco Holding SA, JPMorgan Chase & Co., and Morgan Stanley & Co. The sale also had an effect on the global currency market, driving up the value of the Brazilian Real, increasing 0.6%, and making the only positive motion against the dollar by a major currency. The Real is rallying on speculation Petrobras will exchange some of the money it raises from Monday’s bond sale into local currency.
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