Petrobras (PBR) Issues First International Bond In A Year

Brazil's state-run energy giant Petroleo Brasileiro S.A., or Petrobras (NYSE:PBR) – having the highest debt load in the oil industry – is issuing new global debts to buy back notes that will mature in the coming years. Notably, this the first time in a year that Petrobras is offering an international bond. The bond offering – likely to close by May 23, 2016 – is also the first time by any player in Brazil since June.

In detail, Petrobras has offered five-year notes worth $5 billion having yield 8.625% along with 10-year notes that yield 9%. From the sale proceeds, the integrated energy player will likely buy back notes having principal amount of $3 billion and about to mature by 2018. Investors should know that Moody's Investors Service – a leading provider of credit ratings – has rated the global bonds as "B3". The rating is six notches below the investment grade.

Most importantly, the record high rate that the company is offering reflects its weak fundamentals. In other words, Petrobras hasn’t been in good shape after it got involved in a multimillion dollar money laundering scam. Also, the business scenario for the energy players has not been favorable for a long time following weak oil and gas prices, although crude has started taking a bullish turn.

However, most of the analysts believe that the proceeds from all the new bonds will definitely be used for the benefit of the company or in other words to salvage it.

Headquartered in Rio de Janeiro, Petrobras is the largest integrated energy firm in Brazil and one of the largest in Latin America. The company’s activities include: exploration, exploitation and production of oil from reservoir wells, shale and other rocks, as well as refining, processing, trading and transportation of oil and oil products, natural gas and other fluid hydrocarbons, in addition to the other energy-related activities.

Nevertheless, the company slipped to a loss in first-quarter 2016. It incurred a loss of $318 million in the first quarter of 2016, while in the year-ago period, it had generated a profit of $1,862 million.

As a result, Petrobras currently carries a Zacks Rank #3 (Hold). Some better-ranked players in the energy sector include McDermott International Inc. (NYSE:MDR) , PetroChina Co. Ltd. (NYSE:PTR) and Murphy USA Inc. (NYSE:MUSA) . Each of these stocks sports a Zacks Rank #1 (Strong Buy).


PETROBRAS-ADR C (PBR): Free Stock Analysis Report

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PETROCHINA ADR (PTR): Free Stock Analysis Report

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