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This excerpt taken from the PBR 20-F filed May 22, 2009. Risks
Relating to PifCo
PifCo’s
operations and debt servicing capabilities are dependent on
us.
PifCo’s financial position and results of operations are
directly affected by our decisions. PifCo is a direct wholly
owned subsidiary of Petrobras incorporated in the Cayman Islands
as an exempted company with limited liability. PifCo purchases
crude oil and oil products from third parties and sells them at
a premium to us on a deferred payment basis. PifCo also
purchases crude oil and oil products from us and sells them
outside Brazil. Accordingly, intercompany activities and
transactions, and therefore PifCo’s financial position and
results of operations, are affected by decisions made by us.
Additionally, PifCo sells and purchases crude oil and oil
products to and from third parties and related parties mainly
outside Brazil. Commercial operations are carried out under
market conditions and at market prices. PifCo’s ability to
service and repay its indebtedness is consequently dependent on
our own operations.
Financing for PifCo’s operations is provided by us, as well
as third-party credit providers in favor of whom we provide
credit support. Our support to PifCo’s debt obligations is
made through guarantees and standby purchase agreements whereby
we agree to repurchase from the holders of PifCo’s notes
their right to receive payment from PifCo in the event PifCo
defaults on its payment obligations.
Our own financial condition and results of operations, as well
as our financial support of PifCo, directly affect PifCo’s
operational results and debt servicing capabilities. For a more
detailed description of certain risks that may have a material
adverse impact on our financial condition or results of
operations and therefore affect PifCo’s ability to meet its
debt obligations, see “Risks Relating to Our
Operations.”
Table of Contents
PifCo depends
on its ability to pass on its financing costs to
us.
PifCo is principally engaged in the purchase of crude oil and
oil products for sale to us, as described above. PifCo regularly
incurs indebtedness related to such purchases
and/or in
obtaining financing from us or third-party creditors. All such
indebtedness has the benefit of a guaranty, a standby purchase
obligation or other support from us, and PifCo has historically
passed on its financing costs to us by selling crude oil and oil
products to us at a premium to compensate for its financing
costs. If for any reason we are not permitted to continue these
practices, this would have a materially adverse effect on
PifCo’s business and on its ability to meet its debt
obligations in the long term.
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