Banco Votorantim plans to raise up to BRL1.2bn ($764m) for three domestic market private equity funds investing in renewable electricity generation projects. The three funds will focus on small hydroelectric projects, biomass plants and wind farms, capitalizing on the Brazilian government’s pipeline of power generation auctions. A BRL210m fund with a 5-year term and 4-year investment period is expected to give investors a 7.5% return, a BRL310m 10-year fund with a 9-year investment period is expected to return 10.5%, and a BRL700m 30-year fund with a 10-year investment period is expected to return 12.0%. The minimum total amount to be raised between the 3 funds is BRL500m. Votorantim Asset Management is managing the funds and Banco Votorantim and Banco do Brasil are managing the sale of shares in the funds. Brazil holds regular auctions for renewable power supply contracts to help diversify its generation sources, with the next scheduled for this month. The government expects to auction off 6,000MW of new electric generation capacity per year during the next decade, about 1,300MW of which is expected to be renewable generation.
Yearly Archives: 2011
Brazilian Equity Woes Temporary: Citi’s Press
Bovespa has lost 16% on the year through Tuesday and many companies’ new issuance plans have been scrapped, but there are still reasons to be constructive about Brazil’s equity outlook, says Citi LatAm strategist Jason Press. He says that the Bovespa has only seen a 12% peak-to-trough drop and Citi reckons from current levels the market will provide 25% returns by year’s end. The US bank has a preference for companies tied to interest-rate sensitive sectors that have suffered but should recover once Brazilian government policies become clearer and worries about the US and Europe subside. These include banks, low-income homebuilders, and certain consumer names, including AmBev. Press called the recent postponed transactions in Brazil a “temporary problem.” New issuance should follow a pickup in the equity market. “In Latin America, there has been an average of $7bn-$8bn in new equity issuance per quarter during the last 18 months, and we see no reason to suspect the market would slow from that,” he says. Press spoke on a panel and on the sidelines of a Brazilian-American Chamber of Commerce event Tuesday in New York.
EI Exits Gafisa
Equity International (EI) has sold its last remaining stake in Brazilian homebuilder Gafisa, completing a series of share sales that began in 2007. The US investment vehicle founded by Gary Garrabrant and billionaire Sam Zell sold the final 2.7% portion over the course of this year. A spokeswoman says the selldown was done through small separate transactions and no values were disclosed. The 2.7% stake – which is the equivalent of about 11.7m shares, according to Economitica – would be worth about BRL84m ($54m). EI made its first investment in Gafisa in 2005. It still has positions in 5 Brazilian companies, including BR Malls.
Elecnor Closes Brazil Project Financing
Spanish infrastructure company Elecnor has obtained a BRL445m ($283m) financing package from BNDES to develop new wind power projects through its Enerfin subsidiary. The loan has a 16 year tenor and will go to finance three parks with a combined total of 150MW in generation capacity in the state of Rio Grande do Sul.
ENA Hits the Road
Empresa Nacional de Autopista (ENA) is meeting US institutional accounts next week to market a 144A/RegS dollar bond. The borrower, which is wholly owned by the Republic of Panama, is scheduled to be in New York on Tuesday and Wednesday next week. Proceeds are partially slated to refinance a $150m of 6.95% amortizing 2025s that helped finance the Corredor Sur tollroad covering 19.5km of Panamanian highway. ICA Panama is selling its Corredor Sur highway concession to the government of Panama for $420m, but the deal is subject to the pre-payment of the Corredor Sur bonds. ENA is expected to come at a pickup to the sovereign’s 5.25% 2020s, which have been trading at 3.44%-3.42%.. With market volatility rising, however, one senior portfolio manager with exposure to Panamanian debt said he is watching the transaction closely but may opt to sit on his current positions. “Right now macro issues are more important than the credit,” he says adding that market conditions may influence ENA’s decision to proceed. HSBC and Global Bank are the leads.
Kirin Seen Paying Premium to Enter Brazil
Kirin’s BRL3.95bn ($2.52bn) purchase of a 50.45% stake in Brazilian brewer Schincariol is seen as expensive, but the Japanese acquirer was prepared to pay more than competing bidders as it looks to gain a foothold in Brazil’s high-growth market, analysts say. Although valuations are difficult to calculate independently as Schincariol is private, the acquirer says the deal represents a 15.7x EV/Ebitda price over the 12 months to March 2011. The bid was significantly higher than the value Heineken and SABMiller had put on the asset when they were heard submitting respective bids of BRL2.2bn and BRL1.8bn. But, according to one analyst, such behavior is typical of Japanese acquirers looking to gain exposure to new markets. “It sounds a lot more expensive,” than other deals in the sector, says one Sao Paulo-based equity analyst. AnBev, for example, has an implied EV/Ebitda of around 14x. Meanwhile, by purchasing Schincariol, Heineken and SABMiller could have taken advantage of synergies that simply don’t exist for the Japanese brewer, but both appeared unwilling to match Kirin’s price. In theory, Kirin could reduce the cost of the deal by buying the remaining 49.55% stake from the minority shareholders at a lower multiple, though this seems unlikely given such sellers are already protesting the purchase (See ‘Schin Shareholders Sue to Stop Sale’). Despite expectations to the contrary, the purchase is unlikely to have a major impact on the Brazilian beer and beverage market. It may have been a different story if SAB Miller or Heineken had made the acquisition and taken a major lead over competitors, but a newcomer like Kirin is unlikely to upset the existing dynamics of the market. “I don’t think it really changes anything,” says one equity analyst. That said, the deal now leaves Petropolis as the only major independent brewery in Brazil, should other players want to consolidate their position. Heineken, for example, could choose to take it over now that Schincariol is of
S&P Revise Guatemala Outlook to Negative
S&P revised its outlook on Guatemala’s BB/B foreign currency rating to negative from stable. The ratings agency says increased political polarization is hindering needed fiscal reform amid low tax revenues and an increasing interest burden. Fiscal deficits will likely continue to exceed 3% of GDP and debt will increase over the next several years absent any measures to strengthen the revenue base.
Safra Whispers Low Double Digits
Banco Safra is heard whispering 10.5% area on its 5-year senior unsecured Global BRL bond, with pricing expected as soon as today. Investors are comping against Banque Safra Luxembourg’s BRL400m Reg S only 10% 2015 (BBB minus), which was priced at 99.627% to yield 10.125% in June and was trading Tuesday afternoon at around 9.9%. “A 10.25% handle would be fine [to participate],” notes one senior portfolio manager following the name. Another, albeit less than perfect, comp is Banco Votorantim’s inflation-linked BRL1bn 6.25% 2016s (Baa2/BBB minus), which have been trading around 10% including IPCA. Investors are comfortable taking exposure to Banco Safra risk in light of the Baa2 and BBB minus ratings from Moody’s and Fitch, but increasing concerns over rapid credit growth in Brazil may mean that accounts will demand higher yields. Investors say Safra is looking at a BRL 300-BRL400m size for the 144A/Reg S deal. JPMorgan and UBS are the leads.
Sare Shuffles Leadership
Mexican homebuilder Sare has named a new CEO and CFO, creating new senior positions as it oversees an expansion plan. CEO Arturo Carvajal is becoming director of strategy and development, overseeing Sare’s growth strategy. Chairman Dionisio Sanchez is assuming a new position that combines the role of CEO and chairman. Also, CFO Gabriel Terrazas moves to the newly created position of director of the finance committee, and is replaced by Araceli Aguado. Aguado will handle day to day finance operations, a spokesman says, while Terrazas will continue to oversee management of the company’s debt profile and financial strategy, as well as relationships with banks, analysts and investors.
Vale Denies Paranapanema Rumor
Brazilian mining company Vale is denying rumors that it has made an offer or is in negotiations to acquire copper producer Paranapanema. The mining major attempted to acquire Paranapanema in September for BRL2.01bn ($1.28bn) in cash, or BRL6.30 per share, but failed after only 38% of shareholders accepted the offer. Paranapanema’s shares had risen as high as BRL5.92 recently before closing at BRL5.17 per share Monday.