Latin America Loan: Petrobras’ US$4.35bn revolving credit facility

IFR Awards 2018
3 min read
Aaron Weinman

Brazilian energy giant Petrobras crossed a new frontier in its debt financing efforts this year as its first-ever revolving credit facility expanded the company’s international banking relationships.

The US$4.35bn five-year loan signed in March was the second-largest loan out of Latin America and the Caribbean in 2018 after Suzano’s US$9.2bn acquisition financing. The transaction also marked a change in direction away from less transparent bilateral loans with international banks that Petrobras previously relied on.

“This was a truly syndicated facility,” said Andre Silva, a managing director at BNP Paribas. “In the past, Petrobras has done bilaterals, but the maturity on [the RCF] was longer than the average bilateral financing.”

Petrobras initially sought just US$3bn from the bank market, but the transaction received US$5.75bn in commitments from 17 institutions, which allowed the company to increase the loan to US$4.35bn.

“Petrobras attracted a diversified group of banks to support its liquidity needs, and to provide support for rating agency purposes,” said Jaime Frontera, a managing director at Credit Agricole.

The move to a widely-syndicated credit facility underscores Petrobras’ commitment to improving its liquidity position and standing among the major credit rating agencies.

“[Petrobras] has shown the market they have access to liquidity,” said Silva. “It is very important to rating agencies that [Petrobras] has access to liquidity if conditions deteriorate.”

With the international bond market proving costlier in 2018, Petrobras showed it could manoeuvre through new and untried asset classes.

Petrobras usually taps bond investors twice a year, but political instability has priced that option out of reach. The security of a five-year revolver termed out its debt profile and removed the need for Petrobras to complete its 2018 funding requirements in an expensive and volatile bond market.

The revolver also set a blueprint for other Brazilian companies seeking more cost-effective sources of funding.

Petrochemical company Braskem received US$1bn from a senior unsecured revolver in May 2018 and pulp and paper exporter Klabin launched a US$1.1bn revolver into syndication in November.

Petrobras’ loan was priced at 170bp over Libor, but this is tied to the company’s Ba3/BB–/BB– credit ratings. The price increases by 15bp if Petrobras draws between 34% and 66% of the facility. If the company draws 67% or more of the five-year loan, pricing will jump by 30bp.

Joint bookrunners BNP Paribas, Citigroup, Credit Agricole and Mizuho syndicated the facility among 13 financial institutions from Asia, Europe and North America.

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