Bigger is not always better. But in the world of one-day
capital markets executions, if it is truly big, it had better
be done truly well. Brazil's Petrobras raised the bar for
itself in February. The $7 billion four-tranche sale was
massive, but required delicate execution.
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It set a new precedent for LatAm issuers.
The state-controlled oil company is one of only a handful of
borrowers in the world that can execute multi-billion dollar
deals that warrant four tranches, says Chris Gilfond, co-head
of LatAm debt at Citi, a bookrunner on the transaction with
Banco do Brasil, Itaú, JPMorgan, Morgan Stanley and
The sale topped Petrobras' 2011 $6 billion three-tranche
offering and attracted more than $25 billion in orders. The
demand allowed the issuer to tighten between 10 and 15 basis
points from the initial guidance in each tranche.
"When you think about global borrowers, it doesn't get more
sophisticated than that," Gilfond says. "They raised an
extraordinary amount of money. They relied not just on emerging
market investors, but oil and gas investors have come to
dominate their order books."
Petrobras is already well established with multiple classes
of global investors as it funds its 'Pré-Sal'
A3/BBB/BBB rated Petrobras built a book of $16 billion by
the day before the transaction. It followed this by printing a
$1.25 billion 2015 tranche at 99.499 with a 2.875% coupon to
yield 3.051%, or US Treasuries plus 275 basis points, and a
$1.75 billion 2017 tranche at 99.419 with a 3.50% coupon to
yield 3.628%, or US Treasuries plus 290 basis points.
The issuer also reopened its 5.375% 2021s for $2.75 billion
at 104.181 to yield 4.796%, or US Treasuries plus 295 basis
points, and its 6.75% 2041s for $1.25 billion at 111.208 to
yield 5.935%, or Treasuries plus 295 basis points. Investors
said it offered a 15 to 25 basis point concession to Petrobras'
curve, depending on the tranche.
Poor secondary liquidity also drove some investors into the
trade. Demand for the 2021 stood out in particular. Buyers
included non-traditional retail investors from Asia, Europe and
the Americas, bringing in institutional investors, hedge funds,
insurance money and private wealth management.
Over 500 accounts participated, according to Itaú,
with 68% allocated to asset managers, 10% to hedge funds, 10%
to insurance, 4% to banks, 2% to pension funds and the
remainder to other investors.
This was the largest debt sale globally since March 2011,
according to Itaú. It was Latin America's second-largest
ever bond with - the first was Venezuela state oil company
PDVSA's $7.5 billion offering in 2007, according to Dealogic.
Petrobras will no doubt have the Bolivarian oil company's mark
in its sights when it looks to top 2012's offering this year.