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China to the rescue of debt-burdened Petrobras with a US$10bn credit

Tuesday, March 1st 2016 - 07:32 UTC
Full article 7 comments
The company has about US$24bn in debt maturing between this year and next against some US$25bn in cash, according to Moody's The company has about US$24bn in debt maturing between this year and next against some US$25bn in cash, according to Moody's

Bonds issued by Brazil's Petrobras ended one to two points higher on Monday as the beleaguered oil company eased refinancing pressure by clinching a US$10bn loan from China. The US$10bn loan from China Development Bank, which can be repaid in cash or oil, will do much to reduce refinancing risks for what is one of the world's most indebted companies.

 The company has about US$24bn in debt maturing between this year and next against some US$25bn in cash, according to Moody's. However, it was bonds due between 2018 and 2020 that outperformed in a up day for the state-owned entity Monday, as investors bet that the new loan will help the company tackle maturities during that period.

“That was the most vulnerable part of the curve,” said a New York based trader. “This gives them some breathing room so they are not forced to do asset sales. One big asset sale and they will be out of the woods between 2017 and 2018s.”

In an effort to address high leverage ratios, the company has been slashing capital spending and trying to shed assets, albeit at a slow pace.

“If they could knock some of their refinancing risks and get yields down, perhaps they could come to market next year,” the trader said.

This is not the first time Petrobras has sought Chinese financing. CDB had already extended a US$3.5bn credit line to Petrobras, and in 2009 the oil company entered a US$10bn loan agreement with China's Sinopec backed by future oil exports, according to Citigroup.

Chinese lenders have also come to the rescue of several cash-strapped borrowers in Latin America hit by the rout in commodity prices, including Argentina, Venezuela, and Ecuador.

“While clearly credit positive for Petrobras, we see a larger significance in this deal as it is another example of China recycling its foreign reserves to shore up its long term supply of raw materials,” Citigroup analysts wrote on Monday.

Top Comments

Disclaimer & comment rules
  • Brasileiro

    The Alliance of BRICS act in a coordinated manner seeking the complementarity of their economies, progress together and serving the common interests.

    https://www.youtube.com/watch?v=joe915L17bI

    BRICS

    Mar 01st, 2016 - 10:40 am 0
  • Skip

    Yeah whatever!

    What you don't see is the need for developed countries to have their large companies bailed out by China.

    Supposedly Australia was going to become China's vassal state..... Brazil beat us to it.

    Enjoy the yuan while it lasts.

    Mar 01st, 2016 - 10:50 am 0
  • L0B0MAU

    US$10bn credit is not exactly a gift!

    In Brazil I doubt if anyone is quite sure about: What China is going to get in return?

    From the past records; it is most likely going to be Lava Jato II [Chinese Edition].

    Mar 02nd, 2016 - 06:10 pm 0
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