Petrobras in $10bn Chinese financing

Financing: China helps Petrobras cash up

The China Development Bank (CDB) has agreed to provide debt-laden Petrobras $10 billion in financing, furthering the growing ties between the Brazilian giant and East Asia.

The term sheet was signed by Petrobras president Aldemir Bendine and the CDB president Zheng Zhijie in Rio de Janeiro on Friday.

Drafts of the financing contracts "are already being negotiated", Petrobras said. The drafts "include the implementation of a trade agreement to supply oil to Chinese companies".

Petrobras said the terms are similar to contracts signed by Petrobras and CDB in 2009. That agreement also amounted to $10 billion in financing and included an oil-supply component whereby Brazil would provide 200,000 barrels per day of oil to China's state oil firm Sinopec for a decade.

The deal announced Friday is the latest example of Chinese financial institutions putting up cash for Petrobras, which has towering debt and a massive capital budget to fund. S&P recently downgraded Petrobras' foreign currency bond to BB: junk status.

Last year, Petrobras secured another $10 billion in funding to help in the development of its pre-salt operations, through agreements with CDB, the Industrial & Commercial Bank of China and the Export-Import Bank of China.

As Chinese dollars has flowed in, Petrobras' construction needs have migrated east, with contracts for some of the operator's floating production facilities getting re-assigned to Chinese yards due to uncertainty that the projects could be completed in Brazil.

Petrobras intends to sell about $14 billion of assets this year in an bid to cut its $130 billion in debt.

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