Petrobras in Fixed-Spread Cash Tender Offers

Cleary Gottlieb represented long-standing client Petróleo Brasileiro S.A. (Petrobras) in abbreviated five-day tender offers targeting 12 series of notes denominated in U.S. dollars issued by Petrobras’ Dutch finance subsidiary, Petrobras Global Finance B.V. (PGF).

The purchase price for each series of notes was based on a fixed-spread over U.S. Treasury security yields. The tender offers launched on March 31, 2021, expired on April 7, 2021, and settled on April 12, 2021.

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. 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. In this case, PGF’s tender offer was structured with “knockout“ and “hopscotch” features. The knockout feature allowed PGF to establish a tender cap of $3.5 billion to be used to fund the transaction. The 12 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.  A hopscotch feature allows an offeror to skip 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 the offeror is able to repurchase the full amount of tendered notes of each series without exceeding the tender cap.

PGF used $2.7 billion to repurchase all of the principal amount of notes validly tendered and accepted across the 12 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.