Yearly Archives: 2011

Luna Gold, developers of the Aurizona gold mine in Northern Brazil, has closed a $30m project financing. The package features a $20m 5-year USD term loan with a 1-year grace period paying Libor+3.625%, and a $10m-equivalent 3-year BRL-denominated revolver paying the DI+3.25%. The miner plans to use the facility to repay $10m in debt with specialist boutique RMB Resources and to fund working capital. WestLB was sole lender. Separately, Australia’s Beadell Resources is planning to raise $80m in the loan market to help develop the Tucano gold mine in Brazil. The facility would include a 115,000-135,000 ounce gold hedge, and the issuer says it plans to involve government-backed Banco da Amazonia to provide access to lower cost funding. The exact details of the financing were not disclosed, and Australia-based Beadell was unable to be reached Wednesday afternoon. Macquarie and WestLB are joint lead arrangers.

Brazilian pharmacies Droga Raia and Drogasil agreed to merge Wednesday in a stock-for-stock transaction valued at BRL1.84bn ($1.18bn). Droga Raia shareholders will receive 2.29 Drogasil shares in exchange for every Droga Raia share, valuing the company at around 10.3x forward Ebitda, according to one Sao Paulo-based equity analyst, in-line with where it has been trading. Drogasil will remain a listed company and be renamed Raia Drogasil, with current Drograsil shareholder taking a 57% stake in the new company. The combined entity will have a 50.4% free float, while 47.7% will be held by the controlling shareholders of the two companies, including Gavea, Pragma and the Pipponzi, Pires and Galvao families. Analysts largely took a positive view of the deal. “It’s fairly valued in my opinion,” says Iago Whately, equity analyst with Fator, who notes it will create a leading retailer in Brazil. “I think it will be accretive for both companies,” says the first analyst, noting the potential for synergies between the two and the likelihood that the deal will help protect their combined market share.

Brazil conglomerate Votorantim’s Participacoes was poised to close its multi-tranche $2.65bn loan Wednesday with some 20 banks heard either signing or about to sign up for the transaction. The deal marked the latest in a series of LatAm loans that have locked in what were considered ultra-tight spreads after Brazilian mining giant Vale and Mexican telecom America Movil set new lows earlier this year. Yet some bankers think that tights may have reached a trough and could be heading higher as banks push back amid an increasingly uncertain global backdrop and as funding costs climb for European institutions. It may be too soon to tell exactly which way spreads are moving, but the number of banks participating on a blue-chip loan like Votorantim’s is telling, says one banker. While the deal was heard to be oversubscribed with a healthy $3.7bn plus in demand, it couldn’t for instance boast the longer list of banks that participated at lower levels on the Vale trade. With Vale, apart from the 5 leads, 17 banks joined at the MLA level and another 6 joined with smaller tickets to push demand to $6bn. On Votorantim, HSBC and Societe General were selected as joint lead arrangers and bookrunners on both the $1.5bn 5-year senior revolving credit facility and the $1.15bn 7 and 8-year export-prepayment facilities. Bank of Tokyo Mitsubishi, BNP Paribas, JPMorgan and Santander were also selected earlier this year for the same positions on the revolver, while BAML, BBVA, Credit Agricole and Sumitomo were mandated as lead arrangers and bookrunners for the export prepayment facilities. Beyond that, just 4 institutions were thought to have come in at lower levels on the revolver and another 6 for the pre-export portions. Brazilian banks were also heard declining to participate after shunning what they considered tight pricing.. “If you look at where Brazilian banks are funding themselves, they would have had a mismatch, and they decided not to [participate],” says a banker with knowled

Banco Safra sailed through a turbulent market to price a larger-than-expected BRL800m ($512m) global BRL bond, upsizing from the BRL500m originally pitched to investors after books swelled to BRL1.6bn plus. This came after another volatile day for stock markets as investors fretted about global growth and remained guarded about taking on risk, but also held out hope for more stimulus from the US Federal Reserve. Nevertheless, Safra seemed to have been given a new lease on life after demand grew for its new BRL global bond and leads were able to adjust 10.5% area talk tighter to 10.25%-10.375% before pricing at par to yield 10.25%. The bonds jumped on the break to reach a high of around 101.00 Wednesday before settling down to around 100.75. The deal’s success was put down to pricing that was seen as cheap against secondary levels on other BRL globals as well as an ability to shine in a primary market where there has been little or no supply of late. “I’m seeing this cheap to anything else in BRL,” says a participating investor. For instance, McDonald’s franchise Arcos Dorados’ BRL 400m 5-year global bonds were trading at a more expensive 8.5% Wednesday afternoon. The issue also represented a 25bp pick up to trading levels on the RegS only Banque Safra Luxembourg’s 10% 2015s, which were seen representing European risk as opposed the pure Brazil exposure on Safra’s latest offering. That said, some rival bankers thought at 10.25%, Safra achieved competitive pricing against local funding. Aside from attractive double digit yields and investors’ high comfort levels with the investment grade credit, it didn’t hurt that the bonds faced little competition in what has been a quiet primary market, not to mention increased demand for offshore BRL assets after the government imposed further tax burdens on local market transactions. Safra’s success has heightened expectation of more BRL Global trades on the horizon, with one investor saying that toll-road credit CCR could try it

Brazil’s economy is showing signs of overheating and heightened vigilance against financial risks are required given the pace of credit growth and continued reliance on external borrowing, the IMF says in its Article IV consultation with the sovereign. Macroprudential policies have played a helpful role in slowing credit in some segments, the IMF says, but such policies may need to be applied more broadly to gain traction. Further macroeconomic policy adjustment should continue to be a part of the response to large capital inflows, according to several IMF directors. However, overall financial indicators remain favorable, it says. The multilateral’s executive directors stress the importance of further calibrating policy mix to address an array of near-term macroeconomic pressures. The IMF says it welcomes the decision by Brazil authorities to phase out fiscal stimulus introduced during the financial crisis. Additional fiscal tightening would support disinflation and reduce the need for additional interest rate hikes. The IMF says it also supports the decision to reduce funding to BNDES.

Gol’s corporate family rating has been lowered to B1 from Ba3 by Moody’s. The Brazilian airline was downgraded as a result of expected pressure on yields, combined with an unexpected increase in operating costs that will erode its earnings. Leverage is also expected to increase over the near to medium term as a result of its acquisition of Webjet. Weakening earnings and cash flows contribute to the lowered rating, since the cash buffer is considered a critical ratings driver for the industry, it adds.