By Tim Seymour
Petrobras (PBR) issuing $11 billion in debt set a record for an emerging markets debt offering. The company is using the opportunity of negative real rates in Brazil (officially no, but in terms of true cost of living, YES), and most of the world to tap a global debt market starving for yield.
Petrobras is issuing at +260 to UST 10-year but at a major discount to other oil/gas issuers in Latin America as they bear the brunt of the $240 billion CAPEX plan and political social netting that Dilma has put under the consumer in Brazil (to the detriment of the economy).
Bloomberg reports that with $74.2 billion in debt, it has 10x the leverage of Exxon. The stock looks to open flat but this is the sweet spot for PBR to improve cash flow in this rate environment until the music stops or until rating agency S&P does a massive downgrade.
The stock could not get through that key $19.50 level and looks toppy despite outperforming Brazil, which trades like death.
We remain short PBR here.