Petrobras launches exchange, tender offers for seven note series

By Marisa Wong

Los Angeles, Sept. 9 – Petroleo Brasileiro SA (Petrobras) announced that wholly owned subsidiary Petrobras Global Finance BV has begun two concurrent liability management transactions to purchase or exchange seven series of its outstanding notes.

The offers will expire at 5 p.m. ET on Sept. 13, according to a news release.

Notes tendered for purchase or exchange may be withdrawn at any time at or prior to 5 p.m. ET on Sept. 13.

Settlement for each offer is expected to be Sept. 18.

Exchange offers

The first transaction consists of seven separate private offers to exchange any and all of an outstanding series of old notes for newly issued debt securities of Petrobras Global Finance due 2030 and cash.

Petrobras Global Finance is offering to exchange the following notes, listed with the hypothetical exchange consideration per $1,000 principal amount and in order of acceptance priority level:

• $1,500,414,000 outstanding 4 3/8% global notes due May 2023, with pricing based on the 1¼% U.S. Treasury due Aug. 31, 2024 and a fixed spread of 140 basis points, for a hypothetical exchange consideration of $1,053.96, consisting of $526.98 in cash and $526.98 of new notes;

• $1,984,522,000 outstanding 6¼% global notes due March 2024, with pricing based on the 1¼% U.S. Treasury due Aug. 31, 2024 and a fixed spread of 173 bps, for a hypothetical exchange consideration of $1,129.24, consisting of $564.62 in cash and $564.62 of new notes;

• $2,661,378,000 outstanding 5.299% global notes due January 2025, with pricing based on the 1¼% U.S. Treasury due Aug. 31, 2024 and a fixed spread of 178 bps, for a hypothetical exchange consideration of $1,102.68, consisting of $551.34 in cash and $551.34 of new notes;

• $2,962,000,000 outstanding 8¾% global notes due May 2026, with pricing based on the 1 5/8% U.S. Treasury due Aug. 15, 2029 and a fixed spread of 243 bps, for a hypothetical exchange consideration of $1,277.73, consisting of $638.86 in cash and $638.87 of new notes;

• $3,391,069,000 outstanding 7 3/8% global notes due January 2027, with pricing based on the 1 5/8% U.S. Treasury due Aug. 15, 2029 and a fixed spread 249 bps, for a hypothetical exchange consideration of $1,209.59, consisting of $604.79 in cash and $604.80 of new notes;

• $4,790,114,000 outstanding 5.999% global notes due January 2028, with pricing based on the 1 5/8% U.S. Treasury due Aug. 15, 2029 and a fixed spread of 269 bps, for a hypothetical exchange consideration of $1,122.96, consisting of $336.89 in cash and $786.07 of new notes; and

• $2,623,099,000 outstanding 5¾% global notes due February 2029, with pricing based on the 1 5/8% U.S. Treasury due Aug. 15, 2029 and a fixed spread of 281 bps, for a hypothetical exchange consideration of $1,106.13, consisting of $331.84 in cash and $774.29 of new notes.

The hypothetical exchange consideration was calculated using the yield of the reference U.S. Treasury security as of 2 p.m. ET on Sept. 6. Actual pricing will be calculated as of 2 p.m. ET on Sept. 13.

Accrued interest on the old notes accepted for exchange is payable in cash in addition to the applicable exchange consideration.

With respect to each series of old notes with acceptance priority levels 1 through 5, the cash amount will be equal to 50% of the applicable exchange consideration. With respect to the notes with acceptance priority levels 6 and 7, the cash amount will be equal to 30% of the applicable exchange consideration.

Notes may be delivered for exchange under guaranteed delivery procedures until 5 p.m. ET on the second business day after the expiration date.

Petrobras Global Finance said it will not complete the exchange offers if the aggregate principal amount of new notes to be issued in the exchange offers is less than $1 billion.

Each exchange offer is conditioned on the aggregate cash amount payable for all old notes tendered in the exchange offers not exceeding $3 billion and on the maximum cash amount being sufficient to pay the cash amount for all tendered old notes of that series.

The exchange offers are also conditioned on the concurrent cash tender offers; this condition is not waivable.

The new notes are expected to mature on Jan. 15, 2030.

The coupon for the new notes will be determined on the pricing date and will be equal to the sum of the yield of the 1 5/8% U.S. Treasury security due 2029 plus 322 bps.

Cash offers

The second liability management transaction consists of seven separate offers to purchase for cash any and all of each series of the old notes listed above.

Holders who are either (i) qualified institutional buyers within the meaning of Rule 144A under the Securities Act or (ii) non-U.S. persons (as defined in Rule 902 under the Securities Act) located outside the United States within the meaning of Regulation S under the Securities Act are not permitted to participate in the cash offers. All other holders of the old notes are eligible to participate; participating holders are required to certify that they are retail holders.

The company is offering the following hypothetical tender considerations for each $1,000 principal amount of notes, with the notes listed in order of acceptance priority levels:

• $1,053.96 for the 4 3/8% global notes due May 2023, with pricing based on the 1¼% U.S. Treasury due Aug. 31, 2024 and a fixed spread of 140 bps;

• $1,129.24 for the 6¼% global notes due March 2024, with pricing based on the 1¼% U.S. Treasury due Aug. 31, 2024 and a fixed spread of 173 bps;

• $1,102.68 for the 5.299% global notes due January 2025, with pricing based on the 1¼% U.S. Treasury due Aug. 31, 2024 and a fixed spread of 178 bps;

• $1,277.73 for the 8¾% global notes due May 2026, with pricing based on the 1 5/8% U.S. Treasury due Aug. 15, 2029 and a fixed spread of 243 bps;

• $1,209.59 for the 7 3/8% global notes due January 2027, with pricing based on the 1 5/8% U.S. Treasury due Aug. 15, 2029 and a fixed spread 249 bps;

• $1,122.96 for the 5.999% global notes due January 2028, with pricing based on the 1 5/8% U.S. Treasury due Aug. 15, 2029 and a fixed spread of 269 bps; and

• $1,106.13 for the 5¾% global notes due February 2029, with pricing based on the 1 5/8% U.S. Treasury due Aug. 15, 2029 and a fixed spread of 281 bps.

The hypothetical purchase price was set based on the yield of the reference U.S. Treasury security as of 2 p.m. ET on Sept. 6. Actual pricing will be determined using the yield as of 2 p.m. ET on Sept. 13.

Accrued interest is payable in cash in addition to the applicable tender consideration.

Each cash offer is conditioned on the aggregate tender consideration payable for all old notes not exceeding $500 million and on the maximum consideration being sufficient to pay the aggregate tender consideration for all old notes.

The cash offers are also conditioned on completion of the exchange offers, which is a non-waivable condition.

Global Bondholder Services Corp. (866 470-3800 or 212 430-3774, https://gbsc-usa.com/eligibility/Petrobras) is the information agent, the tender agent and the exchange agent.

Citigroup Global Markets Inc., Credit Agricole Securities (USA) Inc., HSBC Securities (USA) Inc., Mizuho Securities USA LLC, Morgan Stanley & Co. LLC and Santander Investment Securities Inc. are dealer managers for the offers.

Petrobras is an oil and gas company based in Rio de Janeiro.

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