Petrobras' record-breaking offer worked lawyers on three continents

September 28, 2010 5:55 AM

BRAZIL - Petrobras' share offering was priced at 120.4 billion reais (US$67 billion) on Thursday - the largest share deal in history, requiring considerable effort from legal teams coordinating the deal in jurisdictions spanning three continents.

Robert Ellison, who heads up Shearman & Sterling LLP's São Paulo office and assisted the underwriters, says "When you get a deal with twists like this you have to get to grips with practicalities and see if it's going to work in every jurisdiction."

He notes that, "It is a Brazilian sovereign rights offering, which isn't the same as a standard IPO, and, secondly, the government decided that people would be able to pay for their shares using government bonds, so that was something that had to be examined from all points of view."

Shearman & Sterling was joined as underwriters' counsel by Mattos Filho, Veiga Filho, Marrey Jr e Quiroga Advogados, which drew on a team of capital markets, investment fund and oil & gas lawyers for the deal. Energy partner Giovani Loss says, "Oil and gas law issues played an important role in the deal, since the assignment agreement for the 5 billion boe [barrel of oil equivalent] was representative to the capitalisation."

Of the proceeds, shares worth some US$42.5 billion will go to the government in exchange for the rights to 5 billion barrels of oil. Through the offer, the government's its stake in Petrobras has risen by 8 per cent to 48 per cent, causing concern among some investors.

Loss also notes the 'excellent team work' with the Petrobras lawyers. Machado, Meyer, Sendacz e Opice Advogados advised the issuer alongside Cleary Gottlieb Steen & Hamilton LLP.

Rumours in Brazil's legal community have it that the tender to land work on the Petrobras file was especially hotly-contested. Ellison confirms that "a lot of law firms were interested in it," but, he says, "We at Shearman had been underwriters counsel to Petrobras for all its bank lending over the years."

Although the firm faced new competition in bidding for the file, ultimately, says Ellison, "There were a lot of firms pitching for it, but our position and stability in Brazil could disperse the interest that the deal generated."

The share sale is part of the Brazilian government's plans to develop the country's pre-salt oil fields estimated to be the largest discovery in the last three decades. Petrobras will invest US$224 billion over five years in a programme which is expected to put Brazil among the world's five largest oil producers and top 10 oil exporters.

Counsel to Petrobras

Brazil

Machado, Meyer, Sendacz e Opice Advogados

Partners Daniel Faco and Giovanni Biscardi, and associates Cristina Tomiyama, Daniel Szyfman and Marcia Lencastre

Motta, Fernandes Rocha - Advogados

Partner Luiz Leonardo Cantidiano

US

Cleary Gottlieb Steen & Hamilton LLP

Partners Nicolas Grabar and Francesca Odell, senior attorney Carla Passos, and associates Dana Stringer, Vivian Lee, and Olivier De Moor

Offshore

Walkers

Counsel to Bank of America Merrill Lynch, Banco Bradesco BBI, Banco Santander, Citigroup Global Markets, Itau BBA, and Morgan Stanley

Brazil

Mattos Filho, Veiga Filho, Marrey Jr e Quiroga Advogados

Partners Sergio Spinelli, Renato Ximenes, Jean Arakawa, Marina Procknor and Giovani Loss, and associates Hiram Pagano Filho, Ivan Iais, Guilherme Caputo, Luiz Henrique Gonçalves, Frederico Bullamah and Jacqueline Huang

US

Shearman & Sterling LLP

Partners Stuart Fleischmann, Rob Ellison, Don Lonczak and Sami Tountounji, and associates Mathias von Bernuth, Anasby Fernanda Iacia and Olivia Olivier De Moor

(Source: Latin Lawyer)

Petrobras has shown interest in an establishment on Curacao to distribute asphalt products from this island.

28 September 2010