Petroleo Brasileiro SA, Brazil’s state-controlled oil producer, also known as Petrobras Brazil, is returning to global debt markets for the first time since 2023. The oil company wants to raise money by selling bonds.
Petrobras Brazil Tapping Into the Global Bond Market
Sources close to the company say the bonds that Petrobras is selling will be paid back in 2035. Those who gave the information also said the company will be offering a return, or interest, of 6.5%.
Financial expert Eduardo Ordonez, a debt portfolio manager at BI Asset Management in Copenhagen, believes that the potential risks and rewards of the bonds are uneven. “The risk-reward seems lopsided. For sure, it can be stable, but you will be exposed to political headlines and a more aggressive caper policy,” Ordonez said.
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Approval of Issuance of Bond Abroad
When a company or government gets “Approval of Issuance of Bond Abroad,” it means that it has been permitted to sell bonds to other people in other countries.
Bonds are like IOUs, where the company or government borrows money from investors and then promises to pay it back later with interest. Selling these bonds in the bond market to investors in other countries can help them raise a lot of money. They can use this money to grow their businesses, pay off their debts, or even start new projects.
The dollar-denominated notes or bonds that Petrobras is selling are not secure. This means any specific assets don’t back them. However, the company itself guarantees the bonds.
Therefore, Petrobras will take responsibility and pay back investors if anything goes wrong. The money made from selling the bonds will be used for general business needs and to buy back other bonds that are already issued.
Selling Bonds
S&P Global Ratings, a company that evaluates investment risks, has given the notes a “BB” rating. This rating means the bond is considered “investment average,” which means it carries some risk.
This is not the first time Petrobras Brazil has sold its bonds. The last dollar bond sale was in June 2023, when the Rio de Janeiro-based oil company sold $1.25 billion in notes due in 2033.
Petrobras is only one of the many Brazilian companies currently selling bonds in global markets. The board of Centrais Eletricas Brasileiras SA, known as Eletrobras, a large electricity company, also announced the same thing.
The electricity company also announced that it planned to issue bonds abroad. Another company is Suzano SA, a major paper company. Suzanne is considering doing the same in Chinese currency. It mandated banks to make investor calls on a possible Renminbi issuance.
In other emerging markets, countries like Uruguay and Hungary announced that they would sell bonds in foreign currencies to make money. Uruguay announced that it would sell dollar bonds, and Hungary would sell yen-denominated bonds.
ALSO READ: Annual Inflation Rate Eases to 2.9% in July, Hitting Lowest Point Since 2021
Is Petrobras the Largest Oil Company in Brazil?
Yes, Petrobras is the biggest company in Brazil and one of the largest in the world. Since the Brazilian government controls it, the oil-producing company is important to Brazil’s economy, especially when finding and producing oil and natural gas.
This means the Brazilian oil giant significantly impacts how much oil and gas is available in the Brazilian economy. It also determines the amount the country makes from these resources.
Not only is Petrobras the largest oil company in Brazil, but it is also the largest corporation in both Brazil and South America. The company’s headquarters is in Rio de Janeiro. Petrobras’ prestige has always been based on the remarkable growth of Brazil’s crude oil production, which increased significantly from 2,700 barrels per day in 1953 to more than 2,000,000 barrels per day in 2010.
Petrobras was originally a state-owned monopoly; it later became majority-owned by the states. However, it still competes against other Brazilian and foreign companies. The oil-producing company also forms partnerships with both domestic and foreign companies, and it operates in more than 25 countries worldwide.
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