Wednesday, 28 January 2009

Pemex Placed Bonds in International Markets -- Will Petrobras Be Next? But at What Cost?

Pemex is one reason to talk about Petrobras. But before that, dear reader, here is Pemex's final terms spreadsheet:

Issuer: Petróleos Mexicanos

Guarantors: Pemex-Exploración y Producción / Pemex-Refinación / Pemex-Gas y Petroquímica Básica

Ratings:1 Baa1/BBB+/BBB (Stable/Stable/Stable)

Format: Rule 144A/Regulation S with Registration Rights

Joint Lead Managers and Joint Bookrunners: Calyon SA /Citigroup Inc. / HSBC Holdings Plc.

Co-Manager: Santander Investment Securities Inc.
Principal Amount: $2 Billion
Maturity: May 3, 2019
Coupon Rate: 8.00%
Interest Basis: Payable semi-annually in arrears

Interest Payment Dates: May 3 and November 3
Issue Price: 98.313%

Benchmark Treasury: UST 3.75% due November 15, 2018

Benchmark Treasury Spot and Yield: 110-13, 2.543%

Spread to Benchmark Treasury: +570.70 bps

Yield: 8.25%

Pricing Date: January 27, 2009

Will the next one be Petrobras? So long as they offer a competitive rate and also allow the market to price in the fact that it is an oil producer suffering from excessive political intervention.

A source in the capital markets told us that the company is feeling the pinch of
having been front-runned by Pemex yesterday. Some remarks made by CFO Almir Barbassa (to which this blog had no access to the posting time of this note) sort of confirmed that assertion. Petrobras's 2016 bond was uneasy in trading screens today, going up and going down, on speculation a potential deal might be on the making.

Some people are rumouring (you know how market rumours are, evil but true) that Petrobras secured $6 billion from a number of banks in the past few days. It sounds likely that Petrobras will try to sell more debt this year -- but I insist and I disagree with some of my sources, -- placing it will depend on pricing and the market reading of upcoming news over the political use of the company for job generation and all that Lula government crappie paraphernalia. Politicians from the ruling Workers' Party, who want to become masters of the universe, are far from understanding market functioning. Credit metrics will get worse and so will the market perception about Petrobras creditworthiness.

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