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US$ 860 Million Loan by Brazil’s Petrobras Is No Ominous Sign, Says Minister

Petrobras offshore platform in Brazil Brazil's minister of Mines and Energy, Edison Lobão, confirmed a 2 billion Brazilian reais (US$ 861 million) loan made by Brazilian state-controlled oil multinational Petrobras from the Federal Savings Bank (Caixa Econômica Federal) to cover operating costs. According to him, it is just a "regular loan."

"This is not a problem for any company. It has already been done many times. Petrobras has already made loans abroad at other moments, and in Brazil too. Petrobras is just repeating something that it has always done," stated the minister while addressing the Senate regarding infrastructure.

Earlier this week, Brazilian senator Tasso Jereissati spoke about the loan in a plenary session. According to him, the company has "serious cash flow problems." The organization's monthly report to the Securities and Exchange Commission (SEC) shows that the loan was made on October 31 and the objective is to "strengthen the working capital."

According to Jereissati, the conditions negotiated by Petrobras with the CEF were as follows: grace period of 180 days for payment of the loan and single amortization at the end of the event; interest rate of 104% of the CDI Over; incidence of the financial transactions tax (IOF) and amortization and full payment of the loan made.

Jereissati wants Petrobras president José Sergio Gabrielli and the president of CEF, Maria Fernanda Ramos Coelho, to clarify the matter at the Senate's Commission of Economic Affairs.



  • Show Comments (4)

  • João da Silva

    [quote]Finally, you are aware that I lack CH-C expertise on Financial matters, and tend to act based on the Socio-Political side of most issues (simply taking into account the significance of the economic side of any equation)…

    I don’t think that you lack the financial expertise of Ch.C. BUT…….BUT…., you are yet to learn to accompany his broader vision. He always maintained that he was following the happenings in the BRIC countries, because he takes care of the [i]interests[/i] of his [i]customers[/i]. Any business is built on credibility and he follows this sacred rule and I don’t blame him for it.

    [quote]Consequently I daresay, once again, that I find myself taking a favorable position towards the needs (real or otherwise) from Petrobras, which – in the surface – appear to be legitimate. Whatever compromise is deemed necessary (terms of re-payment, etc) should be taken into account a.s.a.p.[/quote]

    I am not sure about your taking a “favorable” position on this issue. Please do read Ch.CÀ‚´s comments titled “different sources, different interpretation !”. He is 100 % right again, because I read different sources. Petrobras borrowed money from Banco do Brasil also!

    There again, the next 4 months are going to be interesting, as our friend DnB would agree 😀

  • Augustus

    Firstly I would like to bring to your attention that I was not familiar with the abbreviated term CEF (and that it referred to the “good old” Caixa Economica Federal”

    Secondly I was partly surprised about the following statement:
    [quote]According to him, the company has “serious cash flow problems.” [/quote] – Yet, after further reflection, taking the continuously falling price of OIL, I suppose this trend must be affecting Petrobras

    Thirdly, while mindful of the ENORMOUS CORRUPTION which exists in all facets of Brazilian society, politics and economy, and despite my agreement with many of the points made by CH-C, I trust that EVERYTHING (any step – financial or otherwise) should be taken to provide assistance/relief to Petrobras – A CRUCIAL COMPANY for the Brazilian welfare (in the same way I consider quintessential that the American Automotive industry must be rescued by the US Congress.

    Finally, you are aware that I lack CH-C expertise on Financial matters, and tend to act based on the Socio-Political side of most issues (simply taking into account the significance of the economic side of any equation)…

    Consequently I daresay, once again, that I find myself taking a favorable position towards the needs (real or otherwise) from Petrobras, which – in the surface – appear to be legitimate. Whatever compromise is deemed necessary (terms of re-payment, etc) should be taken into account a.s.a.p.

  • ch.c.

    different sources, different interpretation !
    Petroleo Brasileiro SA was forced to borrow 2 billion reais ($881 million) from Brazilian state-owned discount bank Caixa Economica Federal as it faced À¢€œmomentary difficultyÀ¢€Â paying taxes, Energy Minister Edison Lobao said.

    Petrobras, as the state-controlled oil company is known, said record profit in the third quarter resulted in a 11.4 billion-real tax bill in October, about 5 percent more than the 10.8 billion reais of cash it had on hand at the end of September, the Rio de Janeiro-based company said in a note on the Brazilian security regulatorˢ۪s Web site.

    À¢€œThere were taxes that Petrobras had to pay that they really shouldnÀ¢€™t have had to pay because they werenÀ¢€™t generated by operating profit but by the strengthening of the dollar,À¢€Â Lobao told reporters in Brasilia. À¢€œThe company had to take money out of its cash holding to pay the taxes.À¢€Â

    Petrobras, which has spent more than 20 billion reais on investment so far this year and paid $6.2 billion in dividends, may also have had to borrow money from state-controlled Banco do Brasil SA to meet its obligations, Senator Tasso Jereissati said in a telephone interview.

    Jereissati, a member of the opposition Social Democracy Party, plans to call hearings on how the company has À¢€œworking- capital problems.À¢€Â As recently as August, Petrobras said it would likely increase a $112 billion 2008-2012 expansion plan

    Break Limit

    The Caixa loan may have caused the company to break a 13.6 billion real domestic borrowing limit imposed as part of government controls on spending by state-owned and state- controlled companies, Jereissati said. That forced Brazilˢ۪s national monetary council to lift the limit on Petrobras yesterday.

    À¢€œIf they broke the limit then they were dealing with an emergency,À¢€Â Jereissati said.

    The cash-flow problems may also have forced Petrobras to delay payments to suppliers over the last 30 days, Jereissati said. Petrobras officials werenˢ۪t immediately available to respond to Jereissatiˢ۪s comments.

    À¢€œWe need to know if they are borrowing because of the credit crisis or because of management issues,À¢€Â Jereissati said. À¢€œWe also want to know how a company that a month ago was announcing new investments in offshore and in new refineries now has working-capital problems.À¢€Â

    À¢€œNo ProblemÀ¢€Â

    Gilberto de Souza, an energy analyst with Banco Espirito Santo in Sao Paulo, said the loan is prudent and has been anticipated for some time.

    Petrobras disclosed the loan with Caixa in notes to its third-quarter results released Nov. 11. The 180-day loan pays interest equal to 104 percent of the countryˢ۪s CDI interbank overnight rate or about 13.67 percent a year at current rates.

    À¢€œThat is a fantastic rate for Brazil right now, and when you consider that international capital markets are closed, I canÀ¢€™t imagine that any company wouldnÀ¢€™t do that,À¢€Â De Souza said. À¢€œThe company has low debt levels.À¢€Â

    Petrobras said in its notes that it borrowed the money to À¢€œreinforce its working capital.À¢€Â Caixa lends much of its cash for sewage and sanitation projects, as well as for homes for lower-income Brazilians.

    Rising Dollar

    Petrobras said about a third, or 3.5 billion reais, of its record 10.9 billion-real third-quarter profit was the result of a 19 percent increase in the value of the dollar against the real in the quarter.

    Petrobrasˢ۪s ability to generate cash and borrow may be further hurt by a 60 percent decline in the price of oil since reaching a high in July and the world credit crunch sparked by recent U.S. bank failures, Lucas Brendler, an energy analyst at Banco Geracao Futuro in Porto Alegre, Brazil, said yesterday.

    The companyˢ۪s international borrowing costs have increased in recent months. The yield on Petrobrasˢ۪s 8.375 percent bond due in 2018 rose 19 basis points to 8.19 percent yesterday. A basis point is one one-hundredth of a percentage point. The bond did not trade today because of the U.S. Thanksgiving Holiday.

    In the last six months, the yield on the bond has risen more than 200 basis points, a sign that the companyˢ۪s international borrowing costs are increasing, Brendler said.

    Petrobras, the countryˢ۪s biggest company, also has its best credit rating. The BBB rating by Standard & Poorˢ۪s is two levels above the governmentˢ۪s rating.

    Petrobras preferred shares, the companyˢ۪s most-traded class of stock, fell 57 centavos, or 2.8 percent, to 19.95 reais, its first decline in four days, in Sao Paulo trading. The Bovespa index of the 66 most-traded stocks on the Sao Paulo stock exchange fell 0.7 percent to 36,212.65.

    Petrobras plans to borrow about $4 billion a year as part of its investment plan. The company may also receive loans from the sovereign wealth fund of the United Arab Emirates, Lobao said today.

  • João da Silva

    Any comment, your Imperial Highness? 😉

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