SÃO PAULO—Brazilian state-run oil company
Petroleo Brasileiro SA, or Petrobras, unveiled details of its
debentures issue on the local debt market, which could totaled up
to 4.05 billion reais ($1.28 billion).
The company will issue the debentures in five series, with
different maturity dates of five-, seven- and 10 years. The company
will sell a total of 3 billion reais in debentures and it can
increase the offer by 1.05 billion reais to accommodate potential
strong demand from investors.
The company said that the debentures of the first and second
series will pay an annual yield of up to 2.15 percentage points
over the interbank rate, called DI, which is 11.4% a year.
The debentures of the others three series will pay a yield based
on the variation of the official inflation index, the so-called
IPCA.
Petrobras said that the exact yield and the amount to be raised
from each series will be determined after the book-building
process. The company didn't provide an exact timetable for this
process.
Petrobras has tapped U.S. and European debt markets for tens of
billions of dollars in financing in recent years, paying
yield-starved investors there interest rates that often fell below
5%. Petrobras' free cash flow remains deeply negative as it
continues to invest heavily to develop ultra-deep-water oil
reserves off the coast of Brazil.
Earlier this month, the company said interest and amortization
on existing debt are expected to cost $21 billion this year, and
capital expenditures are forecast at $29 billion. The company's
operations, on the other hand, are only seen generating $25 billion
in cash during 2015.
But with the biggest debt load of any major oil company,
investors' willingness to lend more money to Petrobras at
affordable interest rates remains to be seen. A corruption
investigation by federal prosecutors alleging a massive bribery and
kickback scheme around the company further damaged its
credibility.
Petrobras wrote off more than $2 billion in 2014 related to the
corruption allegations. The company considers itself a victim of
the ploy and has begun filing a series of lawsuits against
contractors that allegedly profited from it.
Write to Rogerio Jelmayer at rogerio.jelmayer@wsj.com
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