Petrobras selling $7 billion in bonds in record debt offering

Petroleo Brasileiro SA (PETR4), Brazil’s state-controlled oil producer, plans to sell $7 billion of dollar bonds as soon as today in the country’s biggest corporate debt offering ever.

Petrobras, the biggest emerging-market issuer of overseas debt in 2011, will issue $1.25 billion of three-year debt and $1.75 billion of five-year debt while issuing more of its existing notes maturing in 2021 and 2041, according to a person familiar with the plan. The three-year debt will yield 275 basis points above similar-maturity U.S. Treasuries while the five- year notes will yield 290 basis points more, said the person, who asked not to be identified because terms aren’t set.

Petrobras is raising cash overseas to help finance $224.7 billion of investments in the five years through 2015 and more than double oil output by 2020. The Rio de Janeiro-based company sold $6 billion of notes in January 2011 in what was at the time the country’s largest-ever offering. Petrobras also issued bonds in euros and pounds last year, raising about $9.6 billion in international capital markets in 2011, according to data compiled by Bloomberg.

Petrobras will sell $2.75 billion more of its bonds due in 2021 and $1.25 billion more due 2041 each to yield 295 basis points more than Treasuries, the person said. The $7 billion issue matches SABMiller Plc’s $7 billion sale as the largest since March.

The average yield of investment-grade company debt in emerging markets has fallen 29 basis points, or 0.29 percentage point, over the past two months to 4.94 percent, according to a JPMorgan Chase & Co.’s CEMBI Index. Yields on Petrobras’s securities due January 2021 fell two basis points today to 4.64 percent, Bloomberg data show.

Petrobras is rated A3 by Moody’s Investors Service, four steps above junk, and BBB by Standard & Poor’s and Fitch Ratings, the second lowest level of investment grade.

BB Securities, Citigroup Inc., Itau BBA, JPMorgan Chase & Co., Morgan Stanley and Banco Santander are managing the sale for Petrobras, said the person familiar with the company’s plans.

The company’s shares gained 0.8 percent to 24.76 reais. The stock is up 15.2 percent this year, compared with a gain of 12.6 percent for Brazil’s benchmark Bovespa index.

Petrobras announced Jan. 23 plans to name Maria das Gracas Foster to replace Chief Executive Officer Jose Sergio Gabrielli.