Tuesday, June 2, 2015

Brazil Oil Giant Petrobras Sells $2.5 Billion in Bonds

Brazil’s state-controlled oil giant, Petroleo Brasileiro SA, PETR4.BR +5.38%  sold $2.5 billion in 100-year bonds on Monday, the latest sign of robust demand from investors for bonds that offer higher rates than safe government debt.

The bonds were sold at a rate of 8.45% and attracted about $13 billion in orders from investors, according to an investor tracking the sale. In comparison, a 30-year U.S. Treasury bond yields 2.94%, and a Mexican government bond that matures in 2110 recently traded at a yield of 5.52%, according to FactSet.

Some analysts were surprised by the strong demand and the long term of the Petrobras debt—such lengthy bond issuance is typically seen from highly-rated institutions like universities. Petrobras carries a junk rating from Moody’s Investors Service and is rated just one notch above junk by Standard & Poor’s Ratings Services and Fitch Ratings. The company has been dealing with the fallout of a corruption scandal that resulted in management changes and delays in reporting earnings.

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