Brazil's state development bank BNDES will lend 25 billion reais ($12.8 billion) to Petrobras denominated in local Treasury notes, the first loan of its kind in Latin America's largest economy, daily newspaper Valor Economico said on Thursday.

Under the transaction, the National Treasury will issue the notes and transfer them to BNDES, which will, in turn, lend them to Petrobras, Valor said, citing the state-controlled oil giant's chief financial officer Almir Barbassa.

The oil company will distribute the notes among its ten pension funds, which will sell them to raise cash to pay for investments and other expenditures, Barbassa told the newspaper.

BNDES has committed the loans and the structuring for the transaction is finished, although it needs final approval by the National Treasury, Valor said, citing BNDES President Luciano Coutinho.

Petrobras requested the credit line in March as part of a plan to fund its five-year, $174 billion investment plan, Valor said.

Petrobras has had to rely on state lending to fund a significant part of its investment plan, which has been challenged by the plunge in oil prices from last year's record highs and the impact of the credit crunch.

This year, in addition to a $6.5 billion bridge loan led by Banco Santander and Societe Generale among others, Petrobras secured a $12.5 billion credit line from BNDES, $2 billion in loans from the EximBank of the United States and $10 billion from the China Development Bank.

Citigroup