Petrobras confirms US$500mn 10-yr bond issue

Brazil's federal energy company Petrobras confirmed Thursday the issue of US$500mn in ten-year global bonds through its Pifco financial subsidiary. Bear Stearns and Deutsche Bank arranged the operation, for which more than 200 investors subscribed, Petrobras said in a statement. Petrobras said the issue was a "landmark" because it is the first time a Brazilian company is paying lower interest than Brazil's ten-year sovereign risk bonds: Petrobras will pay an annual interest rate of 9.25%, or 1.67 percentage points below government bonds. Furthermore, the bonds were issued with no risk enhancement and for the largest amount and tenor of any Latin American company so far this year, through a public offering under its shelf registration with the US Securities Exchange Commission. Petrobras said it was the first time it targeted high yield investors, which traditionally purchase North American corporate securities. They acquired up to 50% of the bonds, the company said. "It is worth underlining that the high yield segment of the market sometimes has a greater buying potential than the segment that invests in emerging markets, the traditional source of investors for company securities," Petrobras said. Institutional investors, dedicated Latin American funds and retail investors bought the remaining 50% of bonds. The geographic spread across the United States, Europe, Asia and Latin America was also "notable," Petrobras said.