Brazil’s Petrobras to raise bonds to buyback existing debt

Brazilian state owned oil & gas explorer Petrobras is planning to issue new bonds to buy back $3.5bn of its existing debt.

The company plans on buying back $576m of its outstanding bonds paying 8.375% due 2018 at a small premium.

Further, the company plans on issuing a waterfall tender to purchase up to $3bn of existing debt due next year.

The purchase offer expires on 14 June 2016.

Petrobras has about $13.2bn of debt maturing this year and c.$28.5bn due in the next two years.

Sources: WSJ

Petrobras seeks 1bn China-loan faster than planned

Brazil’s state-controlled oil company Petrobras is seeking a $1bn loan from the Export-Import Bank of China earlier than originally planned, on surging debt service costs amid plunging oil prices.

The loan was originally planned for 2017, but rising debt service costs and falling revenues due to softer oil prices compelled the company to avail the loan earlier than planned.

The company is engaged in negotiations with the Chinese lender after signing a term sheet on Monday.

The proceeds from the loan would be utilised towards its equipment and service contracts from Chinese suppliers.

Previously, the company had secured a $10bn loan from China Development Bank Corp. as part of a deal to supply crude to the Asian country. 

Source: Bloomberg

Vale SA to revive its potash project in Argentina

Brazil-based mining company Vale SA stated that it was reviving its Potasio Rio Colorado potash project in Argentina, which it had halted in 2013, to tackle the impact of falling commodity prices and increased fears of the asset’s nationalization.

Vale has scaled down the project and it now aims to produce 1.3m tonnes of potash a year, down from the 4m tonnes it planned earlier.  The miner would have to invest $1.5bn up front in the project and wait for about a year to deliver the new technical specifications to the Argentine government.

Prices of potash hover around $240 a tonne, significantly down from more than $800 a tonne in 2008.

Vale had abandoned the project in January 2013 due to a dispute and had already invested $2.2bn into it. Further, the miner was looking for up to $3bn in tax breaks from the Argentine government to offset soaring costs, but was denied.


Anglo American to sell its Brazilian business for $1.5bn

Mining giant Anglo American plc stated that it had agreed to sell its niobium and phosphates businesses in Brazil to China Molybdenum Co. Ltd for $1.5bn.

Proceeds from the sale would be utilized towards reducing its debt, which Anglo plans to reduce to c.$10bn by the end of 2016 from its FY 2015 debt of $12.9bn. Previously, Anglo had conducted a $1.3bn debt-repurchase offering as part of its turnaround and debt reduction plan.

The company plans of a further $3-4bn of asset sales in 2016. Anglo American plans to focus its mining operations on diamonds, copper and platinum.

Source: WSJ

China-backed State Grid evaluates Abengoa’s Brazilian assets

China State Grid Corp. has shown interest in acquiring Abengoa S.A.’s assets under construction in Brazil.

Officials from the state-owned firm visited Abengoa’s energy transmission project sites in Brazil which are under construction to evaluate a takeover.

According to sources, these assets comprise of Abengoa’s portfolio of assets whose construction had stalled last year when the firm ran into financial problems.

Sources further stated that the Brazilian government wanted to avoid a piecemeal sale of Abengoa’s Brazilian assets to avoid delays. Some of the major assets include a major transmission line linking the Belo Monte hydroelectric dam in the Amazon to consumer markets.

State Grid has invested more than $1bn in Brazil’s energy sector since 2010.

Abengoa has about 6,000 kms of transmission lines which are under construction, requiring billions of dollars in investments.

Further, the company has debts of more than BRL 800m ($218m) with equipment suppliers in the country, according to the electricity industry association Abinee.

Source: Reuters

Moody’s downgrades Samarco Mineracao; outlook negative

Moody’s downgraded Brazil-based mining firm Samarco Mineracao’s CFR to Caa2 from Caa1, with a negative outlook on the company. Ratings on the following debt instruments were also downgraded (outlook: negative):

  • $1bn Senior Unsecured Notes due 2022: from Caa1 to Caa2
  • $700m Senior Unsecured Notes due 2022: from Caa1 to Caa2
  • $500m Senior Unsecured Notes due 2022: from Caa1 to Caa2

Moody’s attributed the downgrade to the continued uncertainty about Samarco’s ability to resume mining operations in Brazil, concerns over liquidity pressures and risk arising from compensation payments the company has to make in light of its dam burst accident.

Samarco’s mining operations have been suspended since November 2015 when a dam rupture at one of its mines caused a massive flood in the Minas Gerais district of Brazil.

In the absence of mining operations, revenue generation has been significantly affected and the company may not have sufficient funds to meet its financial obligations and operating expenses in 2016.

Further, with compensation claims arising from the incident, Samarco could face significant cash outflows in 2016, further pressuring the company’s liquidity.

During March 2016, the miner and its shareholders (BHP Billiton and Vale S.A.) signed a compensation agreement with Brazilian federal authorities which outlined the financial terms Samarco would have to comply with until 2030 in relation to the accident.

As per the agreement, Samarco would have to make payments amounting to a total of BRL 4.4bn from 2016 to 2018, and further annual payments between BRL 0.8 – 1.6bn from 2019 to 2021. Payments to be made from 2022 until 2030 would be defined by the authorities based on the targets set by the agreement.

Source: Moodys’ Rating Report (16 March 2016)



Petrobras gets $10bn loan from Chinese bank in an oil supply deal

Brazil-based Petrobras received a $10bn loan from China Development Bank as part of a deal to supply oil to the country. The loan is the outcome of an accord signed between Brazil and China last year.

The amount of oil to be supplied as part of the contract was not disclosed. The move would provide the beleaguered Brazilian company with a lifeline which struggled with falling oil prices, a corruption scandal and c.$20bn in debt maturing by 2018.

Source: Bloomberg