Political Risk Latin America Blog @PolRiskLatam

Brazil sees world’s biggest ever share issue

Posted in News and Articles, Political Risk by politicalrisklatam on September 29, 2010

by Anthony Harrington for QFinance, September 29th, 2010.

Until now the record for the world’s biggest ever rights issue has been held by the Japanese telecoms giant, NTT, which raised $36 billion in 1987. This dwarfed even the $24 billion raised by the Royal Bank of Scotland in June 2008 (a controversial issue if ever there was one). However, the Brazilian oil giant Petrobras has just raised the bar with a gargantuan $70 billion issue.

Although there was excess demand for the issue, which guaranteed that Petrobras and its bankers would get the paper away with no difficulty, the issue has been highly controversial, raising questions about the rights of minority owners when a government has a large stake in an oil company.

There were several different concerns in the run up to the sale, which took place on Friday September 24. Initially there were concerns that there would not be sufficient appetite from minority shareholders for the deal, since Petrobras was said to be looking for between $35 billion and $40 billion from minority shareholders and $43 billion from the Brazilian government. Several other much smaller Brazilian rights issues by public companies have come up short in recent months. In fact the offer was oversubscribed, so that fear fell away.

Along with that fear there was concern that minority shareholders would be diluted and that the Brazilian government, which has hitherto been praised for taking a very balanced approach to this massive instance of public private sector partnering, would start to ride over the interests of minority stakeholders.(continue reading… )

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