PIMCO, Fidelity Stung by Collapse of Petrobras’ 100-Year Bond

Petroleo Brasileiro SA sold 100-year bonds in June, the move was largely seen as a sign the corruption-tainted oil producer had put the worst of its problems behind it.

For investors like Pacific Investment Management Co., Fidelity Management & Research Co. and Capital Group Inc. — the three biggest holders of the securities — that turned out to be a costly miscalculation. Since the $2.5 billion offering, the bonds have tumbled 15%. That’s four times the average loss for emerging-market company debt.

The plunge deepened last week, when the securities sank to a record-low 69.5 cents on the dollar after Petrobras, as the Brazilian company is known, had its credit rating cut to junk by Standard & Poor’s. The world’s most-indebted major oil producer was stripped of its investment grade by Moody’s Investors Service seven months earlier as a widening probe into alleged bribes paid to former executives at the state-controlled oil company caused it to delay reporting earnings.

“Everything was priced for perfection, and sadly, except for soccer players, Brazil seldom achieves perfection,” Russ Dallen, the head trader at Caracas Capital Markets, said from Miami.

PIMCO didn’t respond to e-mailed requests for comment. Fidelity and Capital Group declined to comment. Petrobras didn’t respond to an e-mail seeking comment on the performance of its bonds. The company has already borrowed enough to finance its projects for the medium term, it said in a statement Sept. 10.