Petrobras in Bond Offering and Liability Management Transaction
June 11, 2021
Cleary Gottlieb represented long-standing client Petróleo Brasileiro S.A. (Petrobras) in an SEC-registered issuance of 5.500% global notes due 2051.
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 will be listed on the New York Stock Exchange. The offering priced on June 2, 2021 and closed on June 10, 2021.
PGF used the net proceeds from the sale of the notes to partially fund concurrent abbreviated five-day cash tender offers targeting thirteen series of its outstanding notes denominated in US dollars. The purchase price for each series of notes was based on a fixed-spread over U.S. Treasury security yields. The tender offers launched on June 2, 2021, expired on June 8, 2020, and settled on June 11, 2021.
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 Gottlieb. 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.
PGF’s tender offer was structured with “knockout“ and “hopscotch” features. The “knockout” feature allowed PGF to establish a tender cap of $2.5 billion to fund the transaction. The thirteen 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 any 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 $2.49 billion to repurchase approximately $2.1 billion aggregate principal amount of notes across twelve series of notes.
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.