RIO DE JANEIRO (Reuters) - A credit line of up to $10 billion from China's state development bank to Petrobras cuts the risk that Brazil's state-run oil company would need government assistance to pay for debt and investment in 2016, Banco Itau BBA said on Monday. The loan from China Development Bank, announced on Friday, is enough to pay nearly all the $12 billion in bond and commercial bank debt coming due this year at Petroleo Brasileiro SA , as Petrobras is formally known.
With about $25 billion in cash at the end of the third quarter and about $19 billion in planned investment this year, the loan, under negotiation since early 2015, gives the company enough cash for Petrobras to pay nearly all of its more than $30 billion of capital and debt needs. "With this financing, Petrobras gains precious time in which to try to implement the much-needed operational improvements, while significantly reducing the risk of needing a capital increase or government support in 2016," Itau BBA oil analysts Diego Mendes and Pablo Castelo Branco wrote in a note to investors.
Petrobras shares rose 6.7 percent to close at 7.35 reais, while its bonds ended one to two points higher.
"This gives them some breathing room so they are not forced to do asset sales," a New York-based trader told IFR. "One big asset sale and they will be out of the woods between 2017 and 2018s." Petrobras' roughly $130 billion of debt is the largest of any oil company and one of the largest of any non-financial company in the world. Its access to capital markets has been sharply reduced since late 2014 by a price-fixing, bribery and political kickback scandal. That access has been further reduced by the downgrade of its debt from investment-grade debt to "junk" status, reducing the pool of investors able lend to the company and raising the cost of capital, a situation made worse by recent declines in the price of oil .
The loan also gives Petrobras the opportunity to use a larger portion of proceeds from a planned sale of $14 billion of assets this year to pay down debt, Mendes and Castelo Branco said.
(Reporting by Jeb Blount and Paul Kilby; Editing by Richard Chang)