Petroleo Brasileiro SA Petrobras (ADR)(NYSE:PBR), better known for its world-class offerings in oil and energy field, announced that it’s likely to get a loan worth $10 billion from Chinese Development Bank. As per the details mentioned in the term sheet of this deal, Petrobras will provide crude oil to Chinese firms in return for this funding.
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This deal is claimed to be a result of the cooperation agreement Brazil and China signed in the previous year. The accord hasn’t been finalized yet, and both the parties are having constant discussions to arrive at a point where they can carry out the proceedings in a hassle-free manner.
The loan amount of $10 billion is too huge to spend on for any company no matter what industry it belongs to, but Petrobras hasn’t given any detail of how it intends to use this money. During the previous visit of Chinese Premier Li Keqiang to Brazil in 2015, the Brazilian President Dilma Rousseff had given hints about using these proceeds in various drilling operations. He mentioned the pre-salt geological formation where Petrobras would start drilling activities; however, other locations can also be included in this list in the near future.
Since Petrobras’ name was found involved in a money laundering scam, it has become tough for the company to raise debt in the stock or bond market. In addition to this, the overall performance and business scenario of Petrobras hasn’t been up to market expectation since mid-2014. The situation even forced the company to sell its assets to raise capital in the recent past.
Keeping everything in mind, experts consider Petrobras very lucky to have received a funding offer from China. Nonetheless, the funding comes as a ray of hope for the company, which looks forward to using it for overall business expansion in a hassle-free manner.
