Brazil’s Petrobras Selling Braskem Stake Amid Corruption Scandal? Company Bail-Out Costs $21 Billion
Petroleo Brasileiro SA aka Petrobras, a state-controlled oil company, is reportedly selling its stake in Brazilian petrochemical company Braskem SA. The sale talks came amid the vast corruption scandal faced by the Rio de Janeiro-based company.
According to an insider who spoke on condition of anonymity, Petrobras has received interest from major chemical companies for its 36 percent stake in Braskem's total capital.
Brazil's state-led oil firm owns 47 percent of Braskem's common shares and 21.8 percent of its non-voting preferred stock. The said shares were worth 3.65 billion reais ($892 million) at Friday's close in Sao Paulo, Reuters has learned.
The source also added that the sale negotiations are private. Thus, Braskem's controlling shareholder, Odebrecht Group, will unlikely have the interest or financial strength to buy the stake. But the sale of Braskem stake is expected to complete by the end of June.
Unfortunately, Odebrecht is also in the middle of a huge price-fixing, bribery and political kickback investigation linked to Petrobras construction projects.
Meanwhile, Petrobras executives announced their plan to expedite a long-postponed program to sell $15.1 billion of assets by the end of 2016. As said by CEO Almir Bendine, the sales are necessary to finance expansion and pay down Petrobras' $130 billion debt.
Since low oil prices and assets sale failure have led the company to reduce its five-year investment plan by 24 percent on Jan. 12, the recent signing of a long-term naphtha supply contract for Braskem has helped the company's stock recover from recent falloffs, making a sale more attractive for Petrobras.
Speaking of oil prices, the source revealed the company has no plans to cut gasoline and diesel prices in the Brazilian market in 2016. But the company expects to reduce refined product imports this year to between 100,000 and 150,000 barrels daily.
In other news, Citigroup Inc. recently revealed that bailing-out Petrobras could cost the government as much as $21 billion. According to Citigroup credit analyst Eric Ollom, the said amount is necessary to plug the company's cash hole and fix the capital structure on a sustainable basis were oil to fall to $20 for 12 months.
"The market is correct to be concerned regarding the potential drain on sovereign credit metrics if nations are required to support their oil and gas quasi-sovereigns under a $20 scenario," Citigroup analysts wrote in a report Friday, as per Bloomberg Business.
"Our analysis shows most of the direct impact of such support is mainly limited to Latin America, specifically Brazil, Colombia, and Mexico, but only in Brazil is the amount significant," they added.
Due to the sprawling corruption scandal at Petrobras, the oil group has decimated the asset base of BTG Pactual with the Brazilian bank, recording almost 50 percent decline in its mutual fund assets last year, Financial Times noted.
* This is a contributed article and this content does not necessarily represent the views of latinpost.com