SÃ O PAULO—Brazil's state-controlled oil company Petroleo
Brasileiro SA, or Petrobras, confirmed the sale of $2.5 billion in
a 100-year bond, the latest sign of robust demand from investors
for bonds that offer higher rates than safe government debt.
The company will pay an annual yield of 8.45%. Deutsche Bank and
J.P. Morgan coordinated the operation, which attracted a demand of
around $13 billion from investors, according to a person close to
the operation, who declined to be named.
Petrobras became the second Latin America borrower to tap
international debt markets with a century bond issue in recent
weeks. Mexico's government in April sold a 100-year bonds worth
€1.5 billion ($1.65 billion) with a yield of 4.2%.
Petrobras has tapped U.S. and European debt markets for tens of
billions of dollars in recent years, paying yield-starved investors
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.
Last 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 seen generating only $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 who allegedly profited from it.
Write to Rogerio Jelmayer at rogerio.jelmayer@wsj.com
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