Petrobras Seen Unlocking Bond Market Shuttered by Bribery CrisisFilipe Pacheco
Petroleo Brasileiro SA has largely been responsible for all but shutting Brazil and its companies out of bond markets.
It’s now poised to unlock them.
The state-controlled oil producer, which is at the center of an ever-widening corruption investigation, will release audited financial results on Wednesday for the first time since August. It’s a move that HSBC Holdings Plc and Bank of America Corp. say will bolster investor confidence and help end the longest drought in overseas issuance since 2008.
The earnings will be the strongest sign yet that Petrobras is closer to resolving a crisis that’s pushed up borrowing costs in Brazil and fueled a slew of ratings downgrades. Just last week, Deputy Treasury Secretary Paulo Valle said Brazil may issue debt abroad before June. Pedro Bianchi, Bank of America’s head of debt capital markets in Brazil, said as many as seven companies are in talks to offer bonds in the coming weeks.
“Investors want to know how the whole Petrobras earnings situation will unfold,” Bianchi said from Sao Paulo. “It’s natural. We still see companies willing to sell debt.”
Bianchi, who leads Latin America’s third-biggest arranger of overseas debt sales this year, said the companies he’s held discussions with are rated investment grade, have revenue in “strong” currencies and are frequent borrowers. He declined to identify them or provide additional information.
Yields on Brazil’s benchmark bonds due 2025 soared as high as 5.16 percent in March before falling to 4.17 percent as of 4:20 p.m. in New York. Average borrowing costs for the nation’s companies have dropped 1 percentage point from a six-year high of 8 percent in March 17.
No Brazilian companies have sold debt overseas since Nov. 14, while the government last issued in September, data compiled by Bloomberg show.
“We didn’t tap overseas markets up to this point because we thought we had to deal with the negative environment to avoid paying additional costs,” Valle said in an interview at Bloomberg offices in Sao Paulo on April 15.
JBS SA, the world’s biggest meat producer, and Marfrig Global Foods SA pulled bond sales in the weeks after federal police arrested more than 20 people in November as part of a probe into whether Petrobras executives demanded bribes from builders in exchange for contracts.
Neither company has been implicated in the probe.
Press officials for JBS didn’t respond to a phone call or e-mail seeking comment on whether it plans to revive the sale.
Marfrig will keep looking for opportunities to reduce the cost of its debt, although it hasn’t made any decision on a new bond issue, the press office said in an e-mailed statement.
“We see investors looking for an entry point in a range of Brazilian credits,” Alexei Remizov, the head of capital markets for Brazil at HSBC, Latin America’s top overseas bond underwriter, said in an e-mail.
Moody’s Investors Service cited Petrobras’s delays when it lowered the company’s rating to junk in February. The Rio de Janeiro-based oil producer said it will present audited results on April 22 for board approval.
“That would bring some normalcy back to Brazil’s capital markets,” Paulo Nepomuceno, a fixed-income strategist at brokerage Coinvalores CCVM, said from Sao Paulo.