The Rising Influence of Rising Affluence

[DewDiligence]

PBR Delays Government Recapitalization Plan

http://dealbook.blogs.nytimes.com/2010/06/23/petrobras-delays-rights-issue-until-sept/

›by Chris V. Nicholson
June 23, 2010, 5:11 am

Petrobras, the Brazilian national oil company, said Tuesday that it would defer a rights issue worth up to 150 billion reais ($84 billion) until September pending a government decision to evaluate certain oil assets.

The Petrobras offering, on track to be the largest worldwide this year, was set for the end of the month and is intended to capitalize the company to finance its exploration of so-called presalt fields in deep waters off the coast of Brazil, where some oil reservoirs are buried below a salt stratum.

The postponed issue, approved by shareholders the same day, will offer up to 60 billion reais worth of preferred shares, and up to 90 billion reais in common stock — much larger than previously reported. [For Brazilian stocks, the “common” shares are voting and the “preferred” shares are non-voting.]

Petrobras shares slid 1 real, or 2.42 percent, to close at 33.24 reais in São Paolo on Tuesday, according to Bovespa data, as the market shrunk from uncertainties about the upcoming issue. Petrobras has said that it needs to raise $58 billion in the coming years to finance its 2010-14 business plan, which calls for investments of $224 billion [#msg-51550385].

The Petrobras rights issue is tied to its purchase of oil rights in the presalt area, with the Brazilian Parliament last month approving both moves in a bill that also authorized the government to subscribe to the rights issue.

The government, which partly privatized Petrobras in 1997, still owns more than 55 percent of its ordinary [i.e. voting] shares.

Specifically, the bill passed said Petrobras could explore and produce “five billion barrels of oil equivalent,” but the value of those rights had yet to be determined, and now seem to be the cause of the giant fundraising’s delay.

In its statement Tuesday, Petrobras said the official valuation of the assets by the National Petroleum Agency (or ANP by its Portuguese initials) would not be ready until August, and cited the timeline as its reason for delaying the rights issue. [I’m not convinced this is the real reason.]

A Petrobras contractor was expected to submit its own estimate of the oil rights and then square its number with that of ANP later this year, leaving it unclear as to why the ANP’s announcement alone should have such enormous consequences.

Bloomberg News noted that initial public offerings in emerging markets raised $29.3 billion this quarter, three times as much as those in the developed world, and questioned whether the market would be able to absorb both Petrobras’s ambitious issue and Agricultural Bank of China’s offering this month, expected to net well over $20 billion.‹