Petrobras’ Bond offering and Liability Management Transaction

Cleary Gottlieb represented Petrobras in the reopening of its 5.600% global notes due 2031. Shearman & Sterling and Pinheiro Neto represented the underwriters and dealer managers in the offering and concurrent $2 billion cash tender offers.

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 are listed on the New York Stock Exchange. The offering priced on October 13, 2020 and closed on October 21, 2020.

PGF used the net proceeds from the sale of the notes to partially fund concurrent cash tender offers targeting 10 series of its outstanding notes. The tender offers were structured as abbreviated tender offers, and included “knockout” and “hopscotch” features. The tender offers launched on October 13, 2020, expired on October 19, 2020, and settled on October 22, 2020.

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 billion to be used to fund the transaction. The 10 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 the 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 $1.94 billion to repurchase approximately $1.51 billion and €132.0 million aggregate principal amount of notes across 9 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.

The Cleary team advising Petrobras included partners Francesca Odell (Picture) and Manuel Silva, associates Andrea Lavourinha and Susan Levinson, and international lawyer Rosane Carmona. Partner Jason Factor, senior attorney David Stewart Fisher, and associate Michael Sims advised on tax matters.

Shearman & Sterling represented BofA Securities, Inc., Deutsche Bank Securities Inc., HSBC Securities (USA) Inc., Itau BBA USA Securities, Inc., J.P. Morgan Securities LLC, Santander Investment Securities Inc. and Scotia Capital (USA) Inc. who acted as joint bookrunners and dealer managers, with a team which included Stuart K. Fleischmann, Roberta Cherman, Thomas Lemouche, Larry Crouch, Ahuva Weinreich, Daniel Kachmar, Thomas Donegan, Kristina Killick, and Gabriela Cerqueira.

Pinheiro Neto advised the underwriters with Ricardo Simões Russo, Marcos Saldanha Proença, Gustavo Guedes Araújo and Luísa Reis Lopes Correia.

Involved fees earner: Jason Factor – Cleary Gottlieb Steen & HamiltonAndrea Lavourinha – Cleary Gottlieb Steen & HamiltonSusan Levinson – Cleary Gottlieb Steen & HamiltonFrancesca Odell – Cleary Gottlieb Steen & HamiltonManuel Silva – Cleary Gottlieb Steen & HamiltonMichael Sims – Cleary Gottlieb Steen & HamiltonDavid Stewart Fisher – Cleary Gottlieb Steen & HamiltonGustavo Guedes Araújo – Pinheiro NetoRicardo Simões Russo – Pinheiro NetoMarcos Saldanha Proenca – Pinheiro NetoRoberta Cherman – Shearman & SterlingLarry Crouch – Shearman & SterlingThomas Donegan – Shearman & SterlingStuart Fleischmann – Shearman & SterlingDaniel Kachmar – Shearman & SterlingKristina Killick – Shearman & SterlingThomas Lemouche – Shearman & SterlingAhuva Weinreich – Shearman & Sterling;

Law Firms: Cleary Gottlieb Steen & HamiltonPinheiro NetoShearman & Sterling;

Clients: Bank of America SecuritiesDeutsche Bank SecuritiesHSBC SecuritiesItaú BBA USA SecuritiesJ.P. Morgan Securities LLCPetrobrasSantander Investment Securities Inc.Scotia Capital Inc.;

Author: Ambrogio Visconti