Petrobras Ratchets Up an Asset-Sale Push That Bond Traders Love

  • Oil giant is meeting investors in the U.S., Europe next month
  • Company’s dollar bonds due in 2040 have jumped 47% this year

Petroleo Brasileiro SA is stepping up efforts to unload assets as the world’s most indebted oil producer seeks to bolster bond investors’ confidence in its turnaround plans.

Brazil’s state-controlled crude giant will meet with fixed income and equity investors in Europe and the U.S. next month to present the business plan and highlight the success it has had divesting peripheral assets, Chief Financial Officer Ivan Monteiro said in an interview Friday. The trip will include stops in New York, Boston, Los Angeles and London, he said.

Petrobras, as the Rio de Janeiro-based company is known, has sold or agreed to sell almost $10 billion in assets in Brazil, Chile and Argentina since last year and plans to raise another $25 billion through 2018. The divestment push is the producer’s main strategy to trim its $125 billion debt load. The effort has helped Petrobras win over bondholders after the company was engulfed in a corruption scandal that led to record writedowns and ratings downgrades. Its $1.5 billion of notes due in 2040 have returned 47 percent this year, the fifth-best performing Brazilian corporate bond, according to data compiled by Bloomberg.

"The reaction to the business plan was clearly positive," Monteiro said. "We have many more options for funding now; it’s the best scenario in a long time." 

Fitch Ratings said Sept. 21 that Petrobras would need to slash debt by $50 billion to reach its desired net debt to ebitda target of 2.5. The ratings company said its base-case scenario is for Petrobras to remain “highly levered” and rely on external financing to meet principal payments as “divestitures are uncertain and difficult to predict.”

On Friday, Petrobras agreed to sell a 90 percent stake in a gas-distribution network for $5.2 billion, the company’s biggest sale to date. The move is part of its plan to jettison what it has deemed non-core assets and focus on its most profitable, deep-water oil projects. The announcement came three days after the oil producer said it reduced its five-year investment plan by 25 percent to $74 billion to cope with low international oil prices and Brazil’s deepest two-year recession on record. 

Monterio said ratings companies will gradually take into account the company’s improved finances and he expects to regain its investment grade rating in the coming years. The company has enough cash to avoid tapping capital markets to in the next two years, and will look at any opportunities to borrow at attractive rates, he said.

“But we are still not happy,” Monteiro said. “The problem is the debt size.”

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