With strong demand and lower cost than expected, oil company raised $1.25bn from 327 investors, mostly from North America
07/04/2023
/i.s3.glbimg.com/v1/AUTH_37554604729d4b2f9f3eb9ad8a691345/internal_photos/bs/2023/R/O/Lf9COcTsOoITlKj8A0kA/sergiocaetano-dfinri-1.jpg)
Sergio Caetano Leite — Foto: Divulgação
Without accessing the international debt market since 2021, Petrobras completed the placement of $1.25 billion in bonds, in an issuance that exceeded the state-owned company’s expectations. In addition to improving its debt profile, the purpose of the transaction was to understand how the company was seen by the market.
“The market sees Petrobras in a very positive, safe way, despite the rumors that are always surrounding it,” Sergio Caetano Leite, the company’s chief financial and investor relations officer, told Valor. The company does not have a financial emergency or a large debt to come due. The last time the state-owned company did not access the market for this long was in 1993, according to the executive. The hiatus was a result of factors such as the pandemic, volatility in international markets, and the war in Ukraine.
Petrobras began talking to market participants on the morning of June 26, initially gauging the market with a rate of 7.25%. The goal was to raise $1.5 billion. In this first contact with banks, 386 investors showed interest and demand reached $6.3 billion. Because of this quick response, the company understood that it would be possible to lower the rate by more than one percentage point, to 6.625%.
According to Mr. Leite, this level is slightly above what investment-grade companies typically raise, another sign of the market’s confidence in the state-owned company. “We had a very low premium compared to U.S. Treasury bonds. That is a sign that the market sees us as less risky,” he said.
The transaction attracted 327 investors, mostly from North America. There were also allocators from the Middle East and Latin America and a smaller proportion from Europe. Nearly 70% of them are fund allocators, according to the director.
The syndicate of banks that structured the operation includes BTG Pactual, Citi, Goldman Sachs, Itaú BBA, MUFG, Santander, Scotiabank, and UBS. Mr. Leite also said that this was the first time Petrobras used environmental, social, and governance (ESG) criteria in selecting these institutions. This required the approval of the Federal Court of Accounts (TCU). “Gradually, Petrobras will implement this type of attitude transversally in everything it does in the company, to choose banks and partners,” he said.
The fundraising comes at a time when other market participants are starting to test the market’s appetite again, following the U.S. Federal Reserve’s (Fed) decision to pause interest rate hikes. This year, apart from the National Treasury, only Braskem, Banco do Brasil, and Vale have issued abroad. And there are expectations for the operations of Gerdau and Cosan.
For Mr. Leite, Latin America, especially Brazil, will once again be in the spotlight. “Europe is still turbulent with the Russian war, China is trying to reposition itself in a new world order … Brazil can expect capital inflows this year,” said the executive. In mid-June, S&P Global Ratings changed the outlook of the debt of 22 Brazilian companies, including Petrobras, to positive from neutral after doing the same for Brazil’s rating.
The state-owned company’s debt amounts to $53 billion. According to Mr. Leite, the oil company’s cash generation is sustainable, with more investments planned. “We will not lose control of the debt. New issuances will depend on macroeconomic conditions, as has happened now. If the key interest rate [Selic] comes down, if there is low volatility, if we feel there are opportunities to improve the debt profile, we will consider going to the market [again],” he said.
*Por Juliana Schincariol — Rio de Janeiro
Source: Valor International