Petróleo Brasileiro S.A. or Petrobras’ (PBR - Free Report) recently announced the pricing of senior notes offering worth $2 billion. The offering, which will be made in two tranches, is likely to close on Sep 27, subject to customary closing conditions.
The first tranche of the notes offering, with an interest rate of 5.3%, will raise $1 billion and is scheduled to mature in 2025. The second part worth $1billion carries an interest rate of 6% and is slated to mature in 2028. Petrobras intends to use the proceeds from the offering for the repayment of borrowings under its senior credit facility and for general corporate purposes.
The company has also offered holders additional notes maturing between 2019 and 2021, with the option to either repurchase their debt or exchange it with longer dated securities. The move will help the company to trim its outstanding debt load and extend the long-term maturities of securities.The deadline for the swap or repurchase is Sep 22.
Joint book-running managers for the offering of its $2 billion worth notes are Bank of America Corporation, Banco do Brasil S.A., Citigroup Inc. , Credit Agricole S.A., HSBC Holdings plc, JPMorgan Chase & Co., and Banco Santander S.A.
On Sep 12, Petrobras announced the pre-payment of its debt of $1.13 billion maturing between June 2019 and March 2020 with JPMorgan. Simultaneously, the company agreed upon a new funding of $847.5 billion maturing in 2022 with JPMorgan.
These transactions emphasize Petrobras’ success in repositioning itself better to obtain borrowings. Last year, Petrobras was downgraded to the lowest speculative level by the rating agency Moody’s Investors Service due to high debt burden, oil slump and severe corruption charges. However, the company is making taking measures to trim its massive debt loads. At the end of June 2017, the company had net debt of $89,263 million, decreasing from the $96,381 million, as of Dec 31, 2016. The company’s debt refinancing transactions and disciplined operational management also resulted led to an upgradation in rating in April 2017.
Currently, Petrobras is concentrating on improving its liquidity and operational performance. The company’s efforts to deleverage or at least refinance its debt obligations to extend its maturity are working in its favor. The company’s divestment goals will help to reinstate its financial health by mitigating the leverage.
Petrobras operates in segments like exploration, refining, marketing, transporting, distribution and biofuels. Petrobras’ mismanagement and involvement in money laundering and corruption cases have worsen the credit metrics of the company. Year to date, Petrobras’ shares have dipped 0.9% against roughly 3.9% gain recorded by the industry.
However, Brazilian energy giant Petrobras’ investments in the Brazil’s pre-salt reservoirs along with cost-improvement measures and divestment of non-core assets are expected to shore up its financials. The company currently carries a Zacks Rank #3 (Hold).
Some better-ranked players from the broader energy space are TransCanada Corporation (TRP - Free Report) , Lonestar Resources US, Inc. (LONE - Free Report) and Vermilion Energy Inc (VET - Free Report) . All the three companies sport a Zacks Rank #1(Strong Buy).You can see the complete list of today’s Zacks #1 Rank stocks here.
TransCanada posted an average positive earnings surprise of 4.06% in the trailing four quarters.
Lonestar Resources delivered an average positive earnings surprise of 39.71% in the trailing four quarters.
Vermilion Energy reported a positive earnings surprise of 528.57% in the previous quarter.
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