Petrobras bonds tighten on deleveraging plan
By Paul Kilby
NEW YORK, June 30 (IFR) - Petrobras's bonds were 4-5bp tighter on Tuesday after the embattled Brazilian oil company unveiled an ambitious deleveraging plan yesterday.
The plan called for an aggressive cut in capex as management looked to turn around one of the world's most indebted companies and one that has been embroiled in a highly publicized corruption scandal.
The company's 2024s and Century bonds were well bid earlier today and were quoted at 445bp-435bp and 526-521bp.
Credit markets largely cheered the management's intention to slash net leverage to below 3.0x by 2018 and to 2.5x by 2020 - down from the 4.8x seen last year - but remained skeptical about its ability to achieve such goals.
Improving leverage ratios depend to a large extent on an ambitious US$58bn divestment plan between now and 2018, which essentially equates to US$15bn in asset sales a year.
Analysts think that may be hard to achieve. There have only been three instances, where oil companies have successfully carried out divestment plans at that pace, said Credit Suisse analyst.
"It will be interesting to see the reaction of rating agencies to the plan, especially since at least Fitch doesn't seem to believe asset sales can be relied upon as the only source for debt reduction," wrote Omar Zeolla, an analyst at Oppenheimer.
Moody's noted on Tuesday the company moved more aggressively than they had expected in terms of capex cuts and deleveraging, but said that execution risks remain high partly because of the size of assets up for sale. Continuación...