Four years ago, bankers, politicians, and traders were patting themselves on the back after Petroleo Brasiliero (Petrobras) raised a stunning $70 billion in the world's largest share sale, as Bloomberg reported at the time, investors bet on its plans to double output within a decade by tapping offshore fields. Things haven't worked out so well...
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Bloomberg, Sept 24th 2010: Petrobras Raises $70 Billion in World's Largest Share Sale [12]
Petrobras, based in Rio de Janeiro, sold 2.4 billion common shares for 29.65 reais each and priced 1.87 billion preferred stock at 26.30 reais apiece. The company sold 115 billion reais ($67 billion) of shares and banks have an option to buy another 5 billion reais, according to a statement sent late yesterday.
Petrobras is spending about $224 billion over the next five years to boost production to 5.38 million barrels a day by tapping deposits trapped under a layer of salt beneath the ocean floor. The share sale was priced at a 2 percent discount to yesterday’s close, suggesting investors are backing Petrobras’s plans to overtake industry rivals such as Chevron Corp.
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“Given Petrobras’s superior asset base and growth profile versus global oils, we believe the stock should trade at a premium relative to peers,” Bank of America analyst Frank McGann said in a note to clients.
and now...
Bloomberg, Nov 16th 2014: Rousseff Says Petrobras Probe to Forever Alter Brazilian Society [13]
The investigation of corruption at state-run oil producer Petroleo Brasileiro SA (PETR4) will permanently change Brazil, President Dilma Rousseff said.
“It will forever change the relationship between Brazilian society, the Brazilian government and private companies,” she told reporters today at the summit of the Group of 20 nations in Brisbane, Australia. “This will end impunity. This, to me, is the main feature of this investigation.”
Police found evidence that at least seven construction companies formed a cartel to win public contracts, including a combined 59 billion reais ($23 billion) in orders from Petrobras as the state company is known, officers including Commissioner Igor Romario de Paula said last week in Curitiba, where the case is before a judge. They declined to name the alleged cartel members.
While the government says the investigation won’t put a stop to the company’s work, it has put pressure on Rousseff’s administration just weeks after she won re-election in the closest race since at least 1945.
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The scandal spread to Petrobras earlier this year after investigators uncovered ties between Paulo Roberto Costa, the company’s former head of refining, and a black-market money dealer.
Bloomberg, Nov 17th 2014: Petrobras Bonds Decline With Brazilian Builders Amid Graft Probe [14]
Petrobras’s $3.5 billion of 2023 notes dropped 1.3 cents to 88.25 cents on dollar, the lowest level since Jan. 31, after saying last week that it would release unaudited third-quarter results on Dec. 12, a month later than originally scheduled.
“Recent scandals surrounding Petrobras’s contracting practices could have a negative implication for the company’s effectiveness in negotiating with equipment suppliers as its executives will likely exercise incremental caution when signing or amending contracts,” Fitch Ratings analyst Lucas Aristizabal wrote in an e-mailed report today. “Petrobras’s credit quality will deteriorate if the ongoing corruption investigation results in monetary penalties or loss of assets.” Fitch rates Petrobras at BBB, the second-lowest level of investment grade.
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Things are getting ugly fast...
- *FITCH SOLUTIONS: PETROBAS' CDS NOW AT WIDEST LEVEL SINCE 2009
