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Petrobras to issue bonds in euros (PBR, BZF, FXE)

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Brazilian oil giant Petrobras ( PBR , quote ) plans to issue a dual-tranche, benchmark-sized . . . and euro-denominated bond offering.

This issuance is part of the company's capital raising necessary to fund its nearly $225 billion investment plan to develop its offshore oil fields. Petrobras will issue a six-year bond with an initial guidance of 285 to 290 basis points over the benchmark mid-swap rate and a 10-year bond with an initial guidance of 330 to 340 basis points over the benchmark mid-swap rate. This would entail a coupon rate of perhaps 5% to 6% -- cheap by Brazilian standards.

The company met with institutional investors this week in France, Switzerland, Netherlands and the United Kingdom ahead of the bond issue.

Petrobras carries an investment grade rating of A3 from Moody's and BBB from both Standard & Poor's and Fitch Ratings.

What is interesting for investors to note here is that Petrobras is borrowing in euros.

It may be a vote of confidence that the euro will remain a viable currency. But it is more likely an indication that Petrobras management thinks the euro will remain weak versus the Brazilian real over the long term.

After all, it makes sense to pay back debt in euros that are worth less years down the road rather than in a long-term appreciating currency like the Brazilian real.

Recently, however, the real -- as embodied by BZF ( quote ) -- and the euro ( FXE , quote ) have traded in near-synchronization as all "risk" currencies dance to the European Union's tune.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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