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Petrobras "Century" Bond Prices Collapse As 'June Plan' Already "Obsolete"
Remember June - when everything was (apparently) awesome in BRIC-land and somehow a large group of duration-seeking greater-fools used Other-People's-Money to buy Petrobras bonds that mature in 100 years! Well those bonds are now trading less than 70c on the dollar (with yields pushing 10%) as Brazil's state-run oil company Petrobras, which slashed its five-year spending plan by 40% in June, admits that plan is already obsolete (two company sources told Reuters on Thursday). Petrobras will likely cut back further as growing debt costs, falling oil prices and a weak currency are the perfect storm for the company.
Still "money good"? Only another 99.75 yearsd to hold them on your balance sheet to find out...
Standard & Poor's decision to cut Brazil's sovereign credit rating to "junk" grade on Wednesday was followed by a separate downgrade for Petroleo Brasileiro SA, as Petrobras is known, on Thursday.
The sources said the downgrade will raise the cost of refinancing Petrobras' more than $130 billion of debt and reduce the capital available to drill wells, build production ships and refineries and pay for infrastructure to boost output and revenue.
"The June plan is already obsolete, its outlook for oil prices, debt costs and the currency are no longer realistic. The plan will have to be changed," one of the sources said.
In a statement released late on Thursday, Petrobras said its project financing was sound in the medium term and is not affected by a downgrade in credit risk by a ratings agency.
...
The S&P move is also Petrobras' second downgrade to junk this year after Moody's Investors Service stripped the company in February.
Many foreign pension funds and other large investors are required to unload bonds once two separate agencies rate them as speculative grade. That could lead to a plunge in the price of existing Petrobras debt and limit the pool of buyers for new offerings.
The second source said that a revision of the plan's premises and spending will be needed.
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With PBR's equity price also collapsing...
We leave it to one of Reuters' sources to conclude: "These are times that will try our hearts."
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Bullish!
Pull it!
fidelity will buy them. they'll buy anything.
Hah, like there are going to be any humans around in a hundred years to redeem them anyway. Well, any humans that resemble what humans look like today.
the truth is that century bonds and century loans have existed in Japan for decades. I do a lot of business in Brazil. 99% of the economy is already underground or "unofficial", so no one gives a flying fuck.
I'll take 100 years with gold coin 10 feet under the mattress. My future heirs and assigns will drink fond toasts to my memory as opposed to pissing on my grave with my Petrabra paper.
I traded this stock and made a bit of money when it was in the 30's in early 2007... glad i sold, deleted it from my feed and never looked back...
Deutsche and JPM were co managers on this great deal!
From page s-14 of the Preliminary Prospectus dated 6/1/15 under risk factors....
A downgrade in our credit rating could negatively impact our cost of and ability to access capital ....A ratings downgrade could adversely impact our ability to access debt markets in the future, increase the cost of future debt and potentially require us to post letters of credit for certain obligations.
Guess they weren't kidding.
Paging Jon Corzine
Brazil = worst aspects of Chinese finance + Venezuela's hot sexual miscegnation.... but fuck all that, it's Carnival!
I see a huge leverage opportunity for Puerto Rico with their sketchy fuel needs and no fuel, there's a big spread between PR bonds and Brazil century bonds, an orgy of lootings worth.
Century bonds, imagine a hundred years of churning potential for TPTB ..........plus derivatuves
Maybe we can sell PR to Brazil wihtout them knowing it then split.
Honestly, Brazilians really don't give a fuck, 90% of their economy is already "unofficial".
Guess what? there is no SNAP program equivalent in Brazil. time to find out how 'meric does without their SNAP program.
Tick tock motherfucker!!!
(FYI - "century bonds and century loans have existed in Japan for decades!!!!)
not the sharpest tool in the shed are you?
I know this company well. Here's the differnce. They reall don't give a shit as they are sitting on large reserves that are still easy to access (require less work/calories).
Quite frankly, during my recent trip to Brazil I learned that these guys are enjoying watch the "frackers" implode. They laugh and say "what? you really think life will get worse in Sao Paulo?"
The laws of Nature and physics are re-asserting themselves, demographics are always a real motherfucker. Forget mandarin, how's your Portuguese?
Meu português é muito bom. Vemo-lo em Ibirapuera!
Let me fix it for you.
"Meu português é muito bom. Vejo você no Ibirapuera"
PS: If u're a brazilian, plz do a big favor to everyone and go back to school, ASAP.
ps2: well, if u're not an brazilian, remember google translator is poor. it cannot understaad our word with ç, sh ...