Follow winding Gabrielli Petrobras $ 40 million of debt plan

yield of Petroleo Brasileiro SA bonds are rising more in 12 months after the Brazilian oil company controlled by the state, said it plans to increase the debt by up to 60 percent to 107 billion U.S. dollars over the next four years.

The yield of 5.75 dollar bonds of the company percent in 2020 rose 81 basis points last month to 4.88 percent. The yields of emerging market bond business rose 40 basis points, or 0.40 percentage points over the same period, data from JPMorgan Chase & Co. show.

CEO Jose Sergio Gabrielli said in Rio de Janeiro on 7 December, the company plans to raise between $ 30 million and $ 40 billion of new debt over the next four years to fund the largest investment plan in the oil industry . Petrobras, which has 67 billion U.S. dollars of total debt, has not issued bonds this year after selling 6.75 billion U.S. dollars in international markets in 2009.

"Investors are betting that they will see a lot of new supply of debt of Petrobras," Jack Deino, who oversees about $ 1.6 billion of emerging market debt at Invesco Inc. in New York, said in a telephone interview. "That's why we are underperforming. There is also uncertainty about when to get the new offer and how much of it."

Petrobras bonds was 112 basis points more than the government takes note of similar maturity on 07 December, the biggest gap since August. The yield is 129 basis points below the 2020 dollar bonds of OAO Gazprom, the Russian monopoly over gas exports, which rose 31 basis points in November and are paying 6.312 percent today.

Sale of Shares

Rio de Janeiro-based Petrobras plans to finance investments in the coming years by selling bonds and bank loans after the conclusion of the world's largest share offering in September, Gabrielli told reporters in Sao Paulo on 06 December. The company, which sold $ 70 billion of shares on 24 September, aims to invest 224 billion U.S. dollars until 2014 to develop reserves on the coast of Brazil.

Petrobras shares fell 9.2 percent in the last month, leaving 32 percent this year.

The company needs to roll over $ 38 billion debt until 2014 as it seeks to double production over the next decade, Gabrielli said on 9 November.

"Gabrielli statements have definitely had an impact," said Juan Cruz, corporate bond analyst at Barclays Plc in New York, in a telephone interview. "Investors are demanding to be paid more by uncertainty."

Petrobras has "definite plans" at this time to sell bonds, Gabrielli said yesterday. The office of the newspaper company declined to comment in an emailed statement.

The company offers $ 6,750,000,000 of foreign debt in 2009 was more than 5.55 billion U.S. dollars which raised over the past 10 years.

Oil Bill

Brazilian President-elect Dilma Rousseff, 62, plans to reappoint Gabrielli, an economist trained at Boston University, as chief executive of Petrobras, a government official briefed on the decision, said on 7 December. She takes office January 1.

Brazil's lower house of Congress approved on December 1, new regulations for oil to increase government control over the energy industry and reduce competition against Petrobras. The regulation will allow the company to be the sole operator of oil fields where licenses have been auctioned. Petrobras will be able to explore all the fields in the areas designated as "strategic."

President Luiz Inacio Lula da Silva, who sent the bill to Congress to sign this month.

"More difficult to justify"

"Even if regulation ensures the assets, the risk is actually higher, because it means more spending and cash flow has a few years to begin to come," said Eduardo Suarez, emerging markets strategist at RBC Capital Markets in Toronto , in a telephone interview. "It's much harder to justify Petrobras is ranked higher than the government now that the government controls 60 percent of the population."

Petrobras is rated Baa1 by Moody's Investor Service, the investment grade lower third and two steps above the Brazilian government's Baa3.

Gabrielli said in an interview of 03 May in Sao Paulo that the company has no plans to sell bonds this year because it is reaching the "upper limit" of the debt ratios before putting credit ratings at risk.

Messages left for the Moody's analyst Thomas Coleman of New York and Milena Zaniboni in Sao Paulo in S & P were not returned.

The concern European countries may have to restructure their debts after ransoms for Ireland and Greece led investors to flee Petrobras bonds in recent weeks, according to Moura Jansen, corporate bond analyst at BCP Securities in Rio de Janeiro .

"There is absolutely more to do with global concerns that the foundations of Petrobras, said in a telephone interview. "As soon as the market is a little more comfortable with the situation in Europe and other macroeconomic point, things might calm down a bit and yields may return."

Default Swaps

The extra yield investors demand to own Brazilian government dollar bonds instead of U.S. Treasuries rose 6 basis points yesterday to 168, according to JPMorgan's EMBI + index.

The cost of protecting Brazil's bonds against default for five years rose 3 basis points to 109, according to CMA. Swaps credit-default pay the buyer face value in exchange for the underlying securities or the cash equivalent of a government or a company fail to adhere to its debt agreements.

The real fell 0.5 percent to 1.6903 per dollar.

The performance of the overnight interest rate futures contract in January 2012 rose 3 basis points to 12.07 percent.

Tupi, Libra

Petrobras is the Tupi field development offshore and may have a minimum stake of 30 percent in the field of government Libra, the largest oil discoveries in the Americas since Mexico's Cantarell in 1976. Tupi and Libra, which may hold as much as 8 billion barrels and 15 billion barrels, respectively, are in a deep water region known as the pre-salt along the coast of Brazil.

The company will invest approximately $ 7 billion to $ 8 billion through 2014 in deepwater fields it bought the government in exchange for new shares, financial director Almir Barbassa, said last month.

Petrobras bonds are also behind Brazilian corporate bonds in the last month. Yields on debt sold by Brazilian companies rose 37 basis points during that period, according to JPMorgan.

"The changes in capital spending program will be the most important factor going forward," Suarez said RBC.