Petrobras in Bond Offering and Liability Management

October 22, 2020

Cleary Gottlieb represented long-standing client Petrobras in an SEC-registered reopening of its 5.6% global notes due 2031.

The notes were issued by Petrobras’ Dutch finance subsidiary, Petrobras Global Finance B.V. (PGF) and are unconditionally and irrevocably guaranteed by Petrobras. The notes are listed on the New York Stock Exchange. The offering priced on October 13, 2020, and closed on October 21, 2020.

PGF used the net proceeds from the sale of the notes to partially fund concurrent cash tender offers targeting 10 series of its outstanding notes. The tender offers were structured as abbreviated tender offers, and included “knockout” and “hopscotch” features. The knockout feature allowed PGF to establish a tender cap of $2 billion to be used to fund the transaction. The 10 series of notes were assigned an acceptance priority level, and PGF was permitted to knock out (i.e., refrain from repurchasing) all notes of a series tendered to the extent that the repurchase of such notes would cause PGF to exceed the tender cap. The hopscotch feature allowed PGF to skip the series of notes that would have caused the tender cap to be exceeded and repurchase series of notes in subsequent acceptance priority levels as long as PGF was able to repurchase the full amount of tendered notes of each subsequent series without exceeding the tender cap. As a result, PGF used $1.94 billion to repurchase approximately $1.51 billion and €132 million aggregate principal amount of notes across nine series of notes.

The tender offers launched on October 13, 2020, expired on October 19, 2020, and settled on October 22, 2020.

Abbreviated tender offers were first sanctioned by the SEC in 2015 in a no-action letter requested by a group of law firms, including Cleary. Market participants have since incorporated features to such offers to help issuers maximize the use of resources available for an offer, while mitigating their financial exposure to a type of offer that is required to be extended to any and all of the notes of a series subject to the offer.

Petrobras is one of the world’s largest integrated oil and gas companies, engaging in a broad range of oil and gas activities. The firm has represented Petrobras for many years in significant SEC reporting, corporate governance, financing, and litigation matters.