Petrobras Said to Sell $4 Billion in Bonds as Yields Plunge

(Bloomberg) -- Brazil oil giant Petroleo Brasileiro SA is taking advantage of a drop in borrowing costs to sell $4 billion in dollar-denominated bonds.

Petrobras, as the state-run company is known, is selling more of its existing notes due in 2022 and 2027 that were first issued in January, as well as securities that mature in 2044 that debuted three years ago, according to a person familiar with the matter, who asked not to be identified because the information isn’t public.

Yields on the oil producer’s bonds have been on a steady decline this year amid cost-cutting efforts that helped boost the company’s net income to the highest in two years in the first quarter. Petrobras is unloading assets to slash about $119 billion of debt, the most of any publicly traded oil company, as it strives to rebuild investor confidence after a massive pay-to-play corruption scandal and the lowering of its debt rating to junk in 2015.

Petrobras is selling $3 billion in five- and 10-year notes at 4.875 percent and 6 percent, respectively, according to the person. The offshore producer is also selling $1 billion of the 2044 bonds at 7 percent, the person added.

The notes due 2022 have returned 4.1 percent this year, while the 2027 securities have gained 9.6 percent, sending the yields on both bonds down more than 1 percentage point since they debuted. Brazilian corporate bonds have returned 7.3 percent this year, compared with an average 5 percent for notes from emerging-market countries, according to the Bloomberg USD Emerging Market Corporate Bond Index.

The company expects to book $8 billion from asset sales this year and curbed planned investments to $17 billion, according to a presentation earlier this month. Potential sales include a stake in a group of African oil fields and the Pasadena refinery in Texas, Petrobras said May 10. The company is also resuming efforts to sell BR Distribuidora and non-strategic oil fields.

Petrobras said May 12 it planned to end 2017 with $19 billion in cash after borrowing $4 billion. The company’s improving financial health has opened up new borrowing opportunities, Chief Financial Officer Ivan Monteiro said on a conference call.

The bond sale will be coordinated by Banco do Brasil, Banco Bradesco BBI, Citigroup Global Markets, HSBC Securities, Itau BBA and Morgan Stanley & Co., according to the person.

Petrobras didn’t immediately respond to an email seeking comment.

--With assistance from Lisa Loray

To contact the reporters on this story: Paula Sambo in Sao Paulo at psambo@bloomberg.net, Aline Oyamada in Sao Paulo at aoyamada3@bloomberg.net.

To contact the editors responsible for this story: Arie Shapira at ashapira3@bloomberg.net, Rita Nazareth at rnazareth@bloomberg.net, Peter Millard, Brendan Walsh