EQUITY CAPITAL RAISING: THE SEO OF PETROBRAS 2010 (B) Harvard Case Solution & Analysis

In the year June 2010, Brazil's national oil company, Petrobras was developing a share issue to develop its pre- stone salt oil fields so labelled as they are trapped under numerous kilometers of seawater and also a hard-to-penetrate layer of salt.

Brazil's offshore pre-salt region broadly tipped to rival the North Sea with regard to size and value had been developing excitement in the energy world ever-since its discovery in the year 2005. Six novel pre-salt fields had been identified more recently and were now prepared for quest. The investments outlined in the strategy also would transform Petrobras into one of the worlds biggest manufacturers and were enormous. Nevertheless, this also introduced major financing challenges for Petrobras, given its capacity to generate cash from its current operations.

So, how could it raise the money? A bond issue so soon after the last one was a chance. It would then be among the worlds largest bond issues. However there was a danger of not fulfilling the need for capital. Would such an issue affect its debt -to-value ratio and its own rating? Would Petrobras be able to preserve its investment grade status?

A share issue was another possibility, but it would likewise be quite big. Would the market be prepared for such a big issue so shortly following the financial crisis? Many unresolved dilemmas lay. Both Gabrielli (CEO) and Barbassa (CFO) realized that regardless of the method used, they were facing one of the worlds largest funding challenges to date. A lot was at stake and erroneous alternatives would have devastating results for Brazil and Petrobras.

PUBLICATION DATE: January 01, 2014 PRODUCT #: IMD671-PDF-ENG

This is just an excerpt. This case is about FINANCE & ACCOUNTING

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