Petrobras Cash Shortage Led to Tax Loan, Lobao Says (Update3)
By Jeb Blount and Andre Soliani
Nov. 27 (Bloomberg) -- Petroleo Brasileiro SA was forced to borrow 2 billion reais ($881 million) from Brazilian state-owned discount bank Caixa Economica Federal as it faced “momentary difficulty” paying taxes, Energy Minister Edison Lobao said.
Petrobras, as the state-controlled oil company is known, said record profit in the third quarter resulted in a 11.4 billion-real tax bill in October, about 5 percent more than the 10.8 billion reais of cash it had on hand at the end of September, the Rio de Janeiro-based company said in a note on the Brazilian security regulator’s Web site.
“There were taxes that Petrobras had to pay that they really shouldn’t have had to pay because they weren’t generated by operating profit but by the strengthening of the dollar,” Lobao told reporters in Brasilia. “The company had to take money out of its cash holding to pay the taxes.”
Petrobras, which has spent more than 20 billion reais on investment so far this year and paid $6.2 billion in dividends, may also have had to borrow money from state-controlled Banco do Brasil SA to meet its obligations, Senator Tasso Jereissati said in a telephone interview.
Jereissati, a member of the opposition Social Democracy Party, plans to call hearings on how the company has “working- capital problems.” As recently as August, Petrobras said it would likely increase a $112 billion 2008-2012 expansion plan
Break Limit
The Caixa loan may have caused the company to break a 13.6 billion real domestic borrowing limit imposed as part of government controls on spending by state-owned and state- controlled companies, Jereissati said. That forced Brazil’s national monetary council to lift the limit on Petrobras yesterday.
“If they broke the limit then they were dealing with an emergency,” Jereissati said.
The cash-flow problems may also have forced Petrobras to delay payments to suppliers over the last 30 days, Jereissati said. Petrobras officials weren’t immediately available to respond to Jereissati’s comments.
“We need to know if they are borrowing because of the credit crisis or because of management issues,” Jereissati said. “We also want to know how a company that a month ago was announcing new investments in offshore and in new refineries now has working-capital problems.”
“No Problem”
Gilberto de Souza, an energy analyst with Banco Espirito Santo in Sao Paulo, said the loan is prudent and has been anticipated for some time.
Petrobras disclosed the loan with Caixa in notes to its third-quarter results released Nov. 11. The 180-day loan pays interest equal to 104 percent of the country’s CDI interbank overnight rate or about 13.67 percent a year at current rates.
“That is a fantastic rate for Brazil right now, and when you consider that international capital markets are closed, I can’t imagine that any company wouldn’t do that,” De Souza said. “The company has low debt levels.”
Petrobras said in its notes that it borrowed the money to “reinforce its working capital.” Caixa lends much of its cash for sewage and sanitation projects, as well as for homes for lower-income Brazilians.
Rising Dollar
Petrobras said about a third, or 3.5 billion reais, of its record 10.9 billion-real third-quarter profit was the result of a 19 percent increase in the value of the dollar against the real in the quarter.
Petrobras’s ability to generate cash and borrow may be further hurt by a 60 percent decline in the price of oil since reaching a high in July and the world credit crunch sparked by recent U.S. bank failures, Lucas Brendler, an energy analyst at Banco Geracao Futuro in Porto Alegre, Brazil, said yesterday.
The company’s international borrowing costs have increased in recent months. The yield on Petrobras’s 8.375 percent bond due in 2018 rose 19 basis points to 8.19 percent yesterday. A basis point is one one-hundredth of a percentage point. The bond did not trade today because of the U.S. Thanksgiving Holiday.
In the last six months, the yield on the bond has risen more than 200 basis points, a sign that the company’s international borrowing costs are increasing, Brendler said.
Petrobras, the country’s biggest company, also has its best credit rating. The BBB+ rating by Standard & Poor’s is two levels above the government’s rating.
Petrobras preferred shares, the company’s most-traded class of stock, fell 57 centavos, or 2.8 percent, to 19.95 reais, its first decline in four days, in Sao Paulo trading. The Bovespa index of the 66 most-traded stocks on the Sao Paulo stock exchange fell 0.7 percent to 36,212.65.
Petrobras plans to borrow about $4 billion a year as part of its investment plan. The company may also receive loans from the sovereign wealth fund of the United Arab Emirates, Lobao said today.
To contact the reporters on this story: Jeb Blount in Rio de Janeiro at
[email protected]; Andre Soliani in Brasilia at
[email protected]
Last Updated: November 27, 2008 15:49 EST
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