BRAZILIAN national oil company Petrobras is preparing a $25bn (£17bn) rights issue to raise funds to explore lucrative pre-salt oil fields.
The rights issue could take place as early as next month, and would be the world’s biggest so far this year.
Petrobras has planned a $220bn (£151bn) investment scheme in the pre-salt fields over the next five years, and hopes to raise $25bn from minority shareholders to kickstart development.
Under the deal, the Brazilian government will sell the rights of up to 5bn barrels of oil and gas to Petrobras, which would use the assets as the basis for a share issue and as leverage for additional loans.
The swap enables Petrobras to retain debt to equity ratios below the 35 per cent required to retain its investment grade credit rating.
The Brazilian press has reported that the government will also step in to buy any leftover shares from the rights issue. The state currently owns a 40 per cent stake in the firm.
The pre-salt fields were discovered off the coast of Brazil in 2007 and take their name from the hard layer of salt above the oil deposits.
Petrobras and Brazilian oil regulators have both commissioned independent valuations of the oil, which will not be completed until after the rights issue is completed.
The firm already produces a quarter of the world’s deep water oil, and stands to benefit from slower production in the Gulf of Mexico following the Deepwater Horizon spill.
The company last week signed up Citigroup, Itau Unibanco, Bank of America, Morgan Stanley, Bradesco and Santander to manage the sale.
It will hold an extraordinary shareholders meeting on 22 June to approve the capitalisation plans.
The government passed laws to approve the deal last week, putting in place regulations for exploring the pre-salt fields.