Feb. 4 (Bloomberg) -- Petroleo Brasileiro SA, Brazil’s state-controlled oil company, sold $1.5 billion of 10-year bonds today, a week after Chief Executive Officer Jose Sergio Gabrielli said he put off plans to issue debt because international markets are “too expensive.”

Petrobras, as the Rio de Janeiro-based company is known, sold the bonds to yield 5.18 percentage points above comparable-maturity U.S. Treasuries, or about 8.13 percent.

Gabrielli’s decision to tap markets underscores how the 73 percent tumble in oil from a July record has squeezed the company’s finances as it tries to cobble together funds for a five-year, $174.4 billion investment plan. Gabrielli said in a Jan. 27 interview in New York that the company had no need to raise more money in 2009 after securing $17.5 billion in loans from Brazil’s state development bank and other lenders.

“They have very large capital expenditure needs, so the deal is not unexpected, despite what they told us otherwise,” said Claudia Calich, who manages $1 billion in emerging-market debt at Invesco in New York.

The yield on Petrobras’s existing 5.875 percent bonds due in 2018 climbed seven basis points today to 7.60 percent, or 4.66 percentage points more than U.S. Treasuries, according to Bloomberg data. The bonds yielded 4.64 percentage points over Treasuries on Jan. 27, a spread that Gabrielli said he was unwilling to accept.

‘More Realistic’

“We want the financial market to adjust the costs to the risks Petrobras has,” Gabrielli, 59, said in an interview with Bloomberg TV in New York that day. “Petrobras’s risk curve needs to be more realistic. The market conditions nowadays in the secondary market for Petrobras are too expensive. We don’t need more funds. We can wait as much as we need.”

The yield spread on the bonds it sold today is the most expensive for Petrobras since 2003, according to Bloomberg data. A spokeswoman for Petrobras declined to comment on the debt sale. Gabrielli’s spokeswoman had no comment.

HSBC Holdings Plc, JPMorgan Chase & Co. and Banco Santander SA manage the bond sale. Petrobras International Finance Co. issued the debt.

Petrobras bonds are rated Baa1 by Moody’s Investors Service, the third-lowest investment-grade rating, and one step lower at BBB by Standard & Poor’s.

Investment Plan

Petrobras’s investment plan aims to double output and develop the offshore Tupi field, the Americas’ largest oil- field discovery since Mexico’s Cantarell find in 1976. Goldman Sachs Group Inc. said last week that Petrobras may be the “best-positioned” major oil company in the world once energy prices rebound.

Emerging-market issuers are returning to debt markets after the global financial crisis cut off access to credit last year. Petroleos Mexicanos, the state-owned oil company, sold $2 billion of 10-year notes in the U.S. on Jan. 27. Codelco, Chile’s state-owned copper producer, raised $600 million on Jan. 20. Mexico, Brazil, Colombia, Turkey and the Philippines sold bonds at the beginning of January.

On Jan. 6, Brazil sold $1 billion of 10-year notes to yield 6.13 percent, or 3.7 percentage points above U.S. Treasuries.

ING forecasts dollar debt sales by developing nations will rise as much as 68 percent this year to a four-year high of $65 billion as a tumble in commodity exports drains foreign reserves and drives down currencies.

Commodities, as measured by the UBS Bloomberg CMCI Index, plunged 50 percent from a July record as the global recession curbed demand for raw materials.

To contact the reporter on this story: Lester Pimentel in New York at lpimentel1@bloomberg.net

Last Updated: February 4, 2009 18:15 EST