Petrobras bonds rally on solid results
By Paul Kilby
NEW YORK, May 18 (IFR) - Bonds issued by Petrobras were rallying Monday morning on better-than-expected first-quarter results and the approval of an up to US$1bn equivalent bond sale in the local markets.
"The results are much better than expected and the fact that they reported on time (is a plus)," said a US-based syndicate manager. "They will get some brownie points for that."
The embattled state-controlled oil company - which only recently released audited full-year results - watched its curve tighten some 15bp-20bp Monday, with the 2024s and 2044s being quoted at around 390bp and 425bp, respectively.
The 2024s bounced to 410bp on April 23, when Petrobras eliminated the threat of a downgrade to junk by satisfying covenant deadlines for reporting full0year financials.
The issuer reported late Friday a 50% year-on-year increase in Ebitda to R$21.5bn, as well as a 75% spike in operating income to R$13.3bn, thanks to increased oil and gas production and higher margins on the sale of oil products.
Net income, however, fell 1% versus the first quarter 2014, to R$5.3bn, mostly due to the weakening of the Real against the US dollar, the company said.
Yet while financial numbers beat expectations, some traders feel that the market's reaction is somewhat overblown in light of the company's deteriorating debt metrics.
"The numbers are good but the company is still highly leveraged," said a New York-based trader. "I am surprised by how much tighter Petrobras bonds are. People are going to take some profits."
This follows the board's approval of a R$3bn (US$994m) local debt issue as well as a US$3.5bn loan in financing last month from the China Development Bank, underscoring the company's access to the capital markets. (Reporting by Paul Kilby; Editing by Marc Carnegie)
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