RIO DE JANEIRO: Brazil’s state-controlled oil company Petróleo Brasileiro SA said Friday it signed a $5 billion financing deal with the China Development Bank, the latest example of a troubled Latin American issuer reaching to deep-pocketed Chinese institutions for help. The 10-year financing arrangement coincided with the signing of a commercial contract whereby Petrobras, as the energy company is known, will supply 100,000 barrels of oil a day to three Chinese firms. The firms are China National United Oil Corporation, China Zhenhua Oil Co. Ltd. e Chemchina Petrochemical Co. Ltd.
This comes as Petrobras, the most indebted oil major in the world with $123 billion of gross debt, looks increasingly unlikely to meet its target of selling $15.1 billion of assets by the end of the year following a number of legal challenges. Brazil’s federal auditing court last week suspended all but five Petrobras asset sales currently under way, while a few days prior a judge suspended the sale of its stake in its fuel distribution subsidiary, BR Distribuidora.
The China Development Bank loan could help Petrobras, which was exposed as the center of a mammoth corruption scandal, recover after the weak Brazilian real and gas and diesel-price cuts put renewed pressure on its balance sheet, said Adriano Pires, an oil-industry consultant in Rio. “This is very important for the company’s cash flow,” said Mr. Pires. In Latin American countries like Brazil, Venezuela and Argentina, “the Chinese substituted the Americans as the large financiers and buyers of companies linked to the energy sector.” Petrobras would need to sell around $4 billion in assets by the end of this month in order to meet its $15.1 billion goal. The company plans to sell a further $19.5 billion worth of assets in 2017 and 2018.
China’s hunger for South America’s natural resources has made it a familiar source of financial relief on the continent in recent years. Its massive state banks have been lenders of last resort to distressed companies and governments around the region that have been cut out of private debt markets. China made billions in loans to Venezuela in recent years in exchange for oil from state-run Petróleos de Venezuela SA, or PDVSA. Struggling with the world’s deepest recession and highest inflation, Venezuela now faces the possibility of defaulting on its debt.
