Petrobras Woes Giving These Bond Speculators a Windfall

Petroleo Brasileiro SA’s woes are turning into a windfall for one group of bond investors.

Facing billions of dollars in writedowns and all but shut out of overseas debt markets because of a widening kickback investigation, Brazil’s state oil producer said this month it will sell $13.7 billion in assets. That’s bolstering speculation its assets in Argentina will be among those that newly installed Chief Executive Officer Aldemir Bendine will jettison. Petrobras looked to unload its Buenos Aires-based producer in 2013.

The talk has spurred a 2.8 percent jump in Petrobras Argentina’s $300 million of notes in the past month as investors wagered that a sale of the Argentine unit, or a significant amount of its assets, would trigger a change-of-control clause requiring a 101-cent buyback. Oil-industry debt in emerging markets has slumped 0.4 percent in that span. And the fact that Petrobras Argentina notes are still trading about 4 cents shy of the repurchase level suggests there are more gains to be had.

“With the new management in place, it is clear now that the disposal will happen,” Omar Zeolla, a corporate debt analyst at Oppenheimer & Co., said by telephone from New York. “The notes will easily reach the 101 level in the next days.”

In response to questions, a Petrobras spokeswoman in Rio referred a reporter to a March 2 filing outlining the producer’s divestment plans for 2015-2016. The filing didn’t specify the company’s plans for Argentina.

Rejected Bids

In a separate statement, a spokesman in Argentina said the company wants to keep its strategic position in the country by increasing gas and oil output from the Neuquen basin.

In 2013, Petrobras held four months of talks with potential suitors for its Argentine assets before disclosing in May of that year that it rejected all bids.

No later than 60 days after a change of control, Petrobras is required to make an offer to buy all outstanding notes at a price equal to 101 percent of principal plus accrued interest up to the date of repurchase, according to the prospectus.

Petrobras Argentina produces an estimated 97,000 barrels of oil a day in the country and is majority owner of Transportadora de Gas del Sur SA, the largest gas pipeline operator in Argentina.

“It is clear this time that there is more pressure to divest,” Nymia Almeida, an analyst at Moody’s Investors Service, said by telephone from Mexico City. “This will be good for creditors.”

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