Petroleo Brasileiro SA borrowed 4 billion reais ($1.8 billion) in a 17-year loan from Banco Bradesco SA to help pay for work on the Abreu e Lima refinery in northeastern Brazil, a source with direct knowledge of the deal said on Tuesday.
Petrobras, as Brazil's state-controlled oil producer is known, will pay annual interest of 9.5 percent plus Brazil's TR minimum savings remuneration rate, said the source, who declined to be identified because terms of the deal are subject to banking secrecy laws in Brazil. The TR yielded 0.3 percent in the 12 months through the end of February, according to the BM&FBovespa exchange.
The Abreu e Lima Refinery, or RNEST, outside of Recife is expected to cost $20 billion by the time it reaches full operating capacity of 235,000 barrels a day in mid-2015.
When first proposed nearly a decade ago the refinery was supposed to cost $4.8 billion. It is now years behind schedule and Petroleos de Venezuela SA, which had planned to take a 40 percent stake in the plant, has pulled out.
The loan comes as Petrobras, which has become involved in a series of scandals entangling its management and cost-control systems, addresses its fundraising needs for 2014. The company has already raised $25 billion from bond sales this year.
Borrowing costs are rising for the Rio de Janeiro-based oil major. Last month its debt ratings were cut by Standard and Poor's in the wake of Brazil's sovereign rating downgrade.
On Monday, a source with direct knowledge of Petrobras' plans told Reuters that Petrobras had shelved a 3 billion real sale of infrastructure bonds in Brazil as well as a reopening of bond sales in British pounds and euros.
The source said Petrobras was concerned the scandals might limit demand or raise the cost of the sales. Petrobras denied the report.
($1 = 2.20 Brazilian reais)
(By Guillermo Parra-Bernal; Additional reporting by Jeb Blount in Rio de Janeiro; Editing by Phil Berlowitz and Richard Chang)