Petrobras to Sell $4 Billion of 10-, 30-Year Bonds (Update2) - Bloomberg.com

Petrobras to Sell $4 Billion of 10-, 30-Year Bonds (Update2) - Bloomberg.com
By Veronica Navarro Espinosa

Oct. 23 (Bloomberg) -- Petroleo Brasileiro SA, Brazil’s state-controlled oil producer, may sell $4 billion of 10- and 30-year bonds as soon as today to repay a bridge loan, according to a person familiar with the transaction.

Petrobras, as the company is known, may sell $2.5 billion of 10-year bonds to yield 5.875 percent and $1.5 billion of 30- year bonds to yield 7 percent, said the person, who declined to be identified because terms aren’t set. Banco Santander SA, Citigroup Inc., HSBC Holdings Plc and JPMorgan Chase & Co. are arranging the bond sale, the person said.

The Rio de Janeiro-based company will use proceeds of the bond sale to repay debt outstanding from a $6.5 billion bridge loan that it signed in January, Petrobras said in an Oct. 20 statement. The company is tapping international credit markets for the third time this year as a recovery in Latin America’s biggest economy boosts demand for the securities.

“Brazil is extremely hot right now and that makes the reception of such a credit a lot easier,” said Luz Padilla, who manages $1.5 billion in emerging-markets debt at TCW Group Inc. in Los Angeles. “You’re going to get a look from people like us, the traditional emerging-markets buyer, on this name but also from the developed market, investment-grade buyers.”

The company sold $1.25 billion of 10-year bonds in July in a re-opening of securities it first issued in February. The yield on the $2.75 billion of notes due in 2019 has tumbled to 5.83 percent from 7.96 percent in February, according to Bloomberg data. The bond’s price has climbed to 114.64 cents on the dollar from 99.44 cents during that period.

Oil Deposits

Petrobras Chief Executive Officer Jose Sergio Gabrielli said last month proven oil reserves may more than double in two to three years to as much as 35 billion barrels.

Petrobras plans to invest about $170 billion in the next five years to boost crude output by 53 percent. The company is spending billions to tap offshore oil deposits including the Tupi field, the largest discovery in the Americas since Mexico’s Cantarell in 1976.

To contact the reporter on this story: Veronica Espinosa in New York at vespinosa@bloomberg.net
Last Updated: October 23, 2009 13:55 EDT"