Update: Petrobras Denies Shelving Debt Sales

Petroleo Brasileiro SA on Monday denied shelving plans to sell debt in local and international markets later this year because of a series of scandals regarding the Brazilian state-controlled oil producer.

A source with direct knowledge of the plans told Reuters on Monday that the company was worried that investor perception about the extent of the scandals could hamper demand for its debt or raise borrowing costs. The source requested anonymity because of the sensitivity of the issue involving Petrobras, as the company is commonly known.

A spokeswoman, who could not be named because of company policy, denied the Reuters' report, without confirming whether the company mulled any potential deal. While Petrobras could change its mind and resume the plans at some point, the fact that the Rio de Janeiro-based company has already raised the $25 billion it needed to finance part of its operations this year helped in the decision, the source added.

Petrobras was considering the sale of as much as 3 billion reais ($1.35 billion) of so-called infrastructure notes this quarter, as well as offering euro- and British pound-denominated global bonds before year-end, a source said earlier this year.

The company has come under fire in Congress and in the media over concerns it might have overpaid for an oil refinery in Texas. In addition, a government agency is investigating allegations that company officials took bribes in exchange for steering contracts to SBM Offshore NV, a Dutch oil-production ship leasing company.

A former official has also been arrested in an alleged money-laundering case. Opposition lawmakers want to investigate the company because of its relationship with the government of President Dilma Rousseff, who might run for re-election in October.

Preferred shares, the company's most-traded class of stock, rose 6.6 percent to 16.46 reais in Sao Paulo trading Monday afternoon. That is the highest level for the stock since December.

($1 =2.22 Brazilian reais)

(Reporting by Guillermo Parra Bernal; Additional reporting by Jeb Blount; Editing by Leslie Adler and Lisa Shumaker)