To fund the world's largest E&P initiative, Brazilian state-run oil company Petróleo Brasileiro S.A. , Petrobras, (NYSE: PBR; PBRA) (São Paulo: PETR3; PETR4) has raised US$70 billion in what is considered to be the largest equity offering on record, catapulting the company to the fore of global capital markets.
In a global offering comprising approximately 2.3 billion common shares, including common shares in the form of American depositary shares, the South American oil giant sold approximately 1.8 billion new preferred shares at R$26.30 per share, and 2.4 billion voting shares at R$29.65 per share, according to a company statement. Common shares in the form of ADSs were offered at a price of US$34.49 per common ADS, and preferred shares in the form of ADSs (preferred ADSs were offered at a price of US$30.59 per preferred ADS. Petrobras may sell an additional 188 million shares by Oct. 24.
Banco Bradesco BBI was lead manager of the offering. BofA Merrill Lynch , Citigroup, Santander, Morgan Stanley and Itau BBA were global bookrunners.
On Sept. 23, Petrobras had already received "more than enough investor interest" to seal the massive deal, the pricing of which occurred after trading hours that same day, according to a report by Reuters. Specifically, the record offering had total demand of US$140 billion, including US$98 billion in bids from existing shareholders, and US$42 billion from institutional investors, according to Reuters.
A deal so hefty could not come without a few bumps in the road, however. In a Sept. 23 report, Reuters noted that "many hurdles haunted the deal" in early 2010, which resulted in a domestic stock market overhang that led to more than a US$70-billion decline in the company's market value.
In April, Simmons & Co. International estimated that Petrobras would need funding beyond its own operating cash flow to finance its more than US$200-billion capital expenditure program through 2014.
By year-end 2010, Simmons & Co. said it expected to see "a brighter picture, including a stronger crude market, resolution of the political situation and removal of the overhang associated with Petrobras' pending equity issuance. "After this point, investors will likely once again focus on the value enhancement to come from the company’s leading position in the Brazilian pre-salt play."
Fast forward to September and it appears that many investors have refocused on the promise of Petrobras' pre-salt upside in one of the