In a precedent-setting private placement deal in Brazil, Milbank, Tweed, Hadley & McCloy has represented the world’s largest FPSO company SBM Offshore N.V. in a $500 million bond offering. The 15-year fixed bond, with a 5.5% coupon, was placed with 16 international institutional investors.
SBM intends to use the proceeds to refurbish a large Floating Production, Storage and Offloading (FPSO) vessel christened Cidade de Anchieta. It will operate under a long-term lease and operating contract with Brazil’s state energy producer Peterobras, which uses FPSOs to process and store enormous amounts of oil extracted from offshore drilling platforms. FPSOs have become a critical part of Brazil’s energy infrastructure, especially since they operate without need of massive pipelines for transporting crude. SBM owns and operates the world’s largest fleet of FPSOs.
“This is a milestone transaction for SBM,” said Milbank Project Finance partnerDaniel Bartfeld, who along with Structured Finance partner Jay Grushkin advised SBM Offshore. “As Brazil’s first private placement in the offshore oil sector, it opens up a whole new source of capital, a welcome development for companies engaged in the offshore sector working with Petrobras. We’re thrilled to have participated in this private placement for SBM Offshore, which as the world’s leading FPSO provider is playing a key role in Petrobras’ continued growth.”
Also working on the deal for SBM Offshore was senior associate Caroline Conway.
“The availability of private placement funding through high-quality institutional purchasers diversifies funding sources for companies engaged in Brazil’s energy sector and allows quality issuers such as SBM Offshore to look beyond conventional commercial bank and bond financings,” Mr. Grushkin said.
The bond placement for SBM follows a series of major transactions by Milbank in connection with Brazil’s offshore sector, including a previous FPSO deal – the firm represented an international lender group in providing financing for OOG’s/Teekays’ FPSO Cidade de Italjaí that will be leased to Petrobras for use in the Santos Basin. Milbank has also worked on the financing of almost a dozen other deepwater drillships and semi-submersibles that are chartered to Petrobras.
In a related financing making use of company-issued project bonds, earlier this year Milbank advised Brazilian oil company Queiroz Galvão Óleo e Gás (QGOG) on the issuance of project bonds (144A) valued at $700 million; proceeds were used to refinance Queiroz’s Atlantic Star and Alaskan Star drilling rigs, both operated by Petrobras.
And in a high-profile project supporting Brazil’s energy-based infrastructure, Milbank advised international lenders who, along with Brazil’s development bank BNDES, financed the development of a new billion-dollar container and liquid cargo terminal in the port city of Santos. When completed, it will be the largest private port terminal in the country and the biggest port project financed in Latin America.
