Petrobras goes all out for a Century
By Paul Kilby
NEW YORK, June 5 (IFR) - Brazil's Petrobras bet big and won this week after printing a US$2.5bn Century bond - the largest-ever trade with this tenor and the oil company's first bond sale since a corruption scandal locked it out of the capital markets last year.
Few thought the company, still reeling from a high-profile investigation into kick-backs, was prepared for a capital markets comeback, let alone a rare 100-year offering.
But Petrobras (rated Ba2/BBB-/BBB-) proved naysayers wrong after building a US$13bn book for an offering carefully crafted to turn heads and to firmly reopen the beleaguered credit's access to international bond funding.
"This was not a curve-building or fundraising exercise, it was about making a statement," said a banker.
Critics were quick to question the logic of investing in a 100-year bond ahead of US rate hikes, especially one issued by an oil company racked by controversy and whose proven reserves last just 17 years.
Nor did many bankers understand why the world's most indebted issuer would raise long-term money when cheaper funding options were available elsewhere along its curve.
Yet ultimately the buyside's appetite for yield and growing faith in the new management's turnaround story overshadowed fears about deteriorating fundamentals or any potential downgrade into junk territory.
The idea - which grew from enquiries among yield-hungry accounts already familiar with the credit - was bold. But it was also a risky bet for a company that could ill afford to flop in its first bond foray in 14 months. Continuación...