Brazil ushers in reserve-based lending

Brazil ushers in reserve-based lending

Loans Debt Corporate & Sovereign Strategy Energy Gas Regulation Brazil Australia Europe United States

Reserve-based lending (RBL) is expected to grow in Brazil following the first two transactions in the country last month, LatinFinance has heard.

Trident Energy and Karoon Energy both used RBL to finance acquisitions of upstream assets from Brazil's state-owned oil company Petrobras.

According to a lawyer on the deal, Trident borrowed from Crédit Agricole, ING and SMBC to buy the Pampo and Enchova clusters for $851m.

Karoon, meanwhile, got an eight-year loan from ABN Amro, Citibank, Deutsche Bank and Santander to acquire the Baúna field in the Santos Basin for $665m, according to a project finance banker not on the deal.

RBL has become possible in Brazil after the oil regulator ANP instituted clearer rules for sales and purchase agreements, said a lawyer from Machado Mayer, which advised Petrobras on the recent sales.

Borrowers and lenders had been reluctant to use sales revenues as guarantees without standardized and clear procedures, the lawyer said. Also, Petrobras used to control almost 100% of natural gas production in Brazil, compared to roughly 75% of crude oil, which made it harder for companies to monetize gas reserves, he added.

Petrobras' ongoing asset sales program will likely change that, the lawyer said. The state-owned company sold the TAG pipeline for $8.6bn in April, put up 15 refineries for sale and reduced its stake in the service station business BR Distribuidora.

The government also wants to increase natural gas production from onshore and shallow water wells by offering additional incentives, the lawyer said, adding that a big announcement is expected for August 22.

The natural gas blocks tend to attract more independent companies that use RBL more often than the than the major firms, which could fuel the growth of the lending structure in Brazil in the near future, the lawyer said.


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