LatinFinance - January/February 2017 - 35

CORPORATE LIABILITY MANAGEMENT OF THE YEAR

PETROBRAS $6BN TENDER/NEW ISSUE
This large, high-stakes bond issue buyback also reopened
the cross-border market for Brazilians
Brazil's state-owned oil company is one
of the world's most indebted. But, under
pressure from investors, the firm made
strides in improving its financial profile and
reducing leverage in 2016.
Divestments have been a big part of the
strategy.
But debt management operations have
also played an important part and a midyear liability management exercise was
particularly impressive. In May, Petrobras
issued $6.75 billion of five and 10-year bonds
to fund a buyback offer. The new issue was
the first from a Brazilian borrower in the
international bond market in close to a year.
The deal's audacious size and impressive
timing make the transaction stand out to
win LatinFinance's Corporate Liability
Management of the Year.
"Markets had been closed to Brazil, and
uncertainty of the political scenario in
the country made it challenging," Bianca
Nasser, Petrobras' corporate finance
manager, says.

Still, Petrobras chose its moment well:
oil prices had rallied around $10 a barrel,
coinciding with the borrower's spreads
compressing some 100 basis points in the
weeks ahead of the new issue.
The oil company announced a new bond
sale in conjunction with a tender offer in
mid-May. It priced an 8.375% $5 billion 2021
bond and an 8.75% $1.75 billion 2026 in an
intraday execution to minimize market risk.
At the same time, it launched a tender offer
in which it ultimately bought back over $6
billion in bonds maturing in 2017, 2018 and
2019.
Pemex's September 2016 tender and
exchange offer, which targeted eight series
of dollar-denominated securities maturing
between 2018 and 2044, was another strong
contender in this category. Ultimately, the
higher stakes of the Petrobras transaction for
the company, and the fact it ended a dry spell
for Brazil's issuers in the international bond
market, made it a compelling winner.
Looking ahead, Petrobras is likely to

BOND HOUSE OF THE YEAR

brought to market an impressive range of
transactions across geographies, currencies
and structures - including several of this
year's award winners. Its performance has
earned it a formidable reputation among its
peers, as well as Bond House of the Year for
the second year running.
The bank beat strong competition from
JPMorgan and Citi in this category. Those
two worked on the Republic of Argentina's
bond market return, a true landmark for
the markets and our Sovereign Bond of the
Year. Although BAML missed that mandate,
LatinFinance decided that the breadth
of its operations - including its depth of
experience in European bond markets
- and its high regard from competitors
outweighed the importance of a single deal.
BAML had a leading role in three
Deals of the Year. Additionally, the
bank's achievements included a tier-two
instrument for Mexico's Banorte, a welltimed liability management exercise for

BANK OF AMERICA
MERRILL LYNCH
Last year was - again - a remarkable one
for bond markets in Latin America and the
Caribbean. Argentina staged its return to
international issuance, while Pemex, Peru
and Petrobras stepped into the market with
jumbo liability management exercises. And
all the while issuers navigated the fickle
moods of investors.
Overall, bond sales picked up from the
previous year. Yet they were lower than
Bank of America Merrill Lynch had hoped,
says Max Volkov, head of Latin American
debt capital markets. He points to a soggy
start, with low oil and commodity prices
dampening interest in LatAm paper.
Despite the tricky conditions, BAML

repeat the liability management structure
to "rollover maturities amortizing soon",
Nasser says. But new bond issues on their
own are unlikely. Cash from operations and
divestments should cover coupons and
amortizations for the next five years,
she says.
Nasser is bullish on the operating
environment, saying reforms being passed
"will be positive for corporates". She points
to a new law allowing other companies to
participate in offshore pre-salt oil projects
as an example. The new regulations will
give Petrobras the right of refusal, ending its
current obligation to take at least 30% in all
pre-salt developments.
"We are only witnessing upsides," she
says. LF

Petrobras tender/new issue
Size: $6bn
Date: May 2016
Supporting Banks: BB Securities,
JPMorgan, Bank of America Merrill
Lynch, Santander, BNY Mellon
Supporting Law Firms: Cleary
Gottlieb, Shearman & Sterling,
Pinheiro Neto, Petrobras in-house
counsel

Jamaica, a green bond for Banco Nacional
de Costa Rica and a euro-denominated issue
for CAF.
After a strong opportunity for issuance
in September, market activity dropped
in November as borrowers and investors
struggled to interpret the implications of
the US election. Yet BAML worked with
Pemex on its opportunistic $5.5 billion
multi-tranche bond sale in December - and
expects more activity soon.
"January will be a busy month," says
Volkov. LF

Bank of America Merrill Lynch
Winning Bond Deals: Minerva
bond, Republic of Peru exchange
offer, Petrobras liability management
exercise

January/February 2017 - L ATINFINA NCE.COM 35
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Table of Contents for the Digital Edition of LatinFinance - January/February 2017
