Brazilian petrochemical concern Braskem has acquired the polypropylene business of Dow Chemicals in the US as well as assets in Germany for a combined consideration of $340m. The business consists of two plants in Texas. The acquisition is Braskem’s second in the US. The purchase involves $323m in cash and $17m in other cash and contingency assumptions. The deal represents a 6.7x EV/Ebitda multiple for the unit. Braskem was advised by HSBC, while Skadden did the same for Braskem.
Yearly Archives: 2011
Posted inDaily Brief
Camargo Subs Close Tender
Holders of 70.9% of Caue Finance’s 2015 bonds and 55.2% of Loma Negra’s 2013 notes have accepted tender offers that expired Monday. Each also received holder approval to eliminate restrictive covenants.” Holders of $106.3m in Caue’s 8.875% 2015 bonds and $55.2m of Loma Negra’s 7.25% of 2013 bonds had accepted the offers as of the July 26 expiration. For each $1,000 in principal holders of the 2015s and 2013s got $1,750 and $1,070, which include a tender premium of $165m and $60 respectively. After the early bird, holders were offered a lower $1,165 and $1,060. The companies are indirect subsidiaries of Brazilian conglomerate Camargo Correa. BAML was sole dealer manager.
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Drogasil Deal Could Reach 11x Ebitda
Talk of a possible merger between Brazilian pharmaceutical companies Droga Raia and Drogasil has been growing louder, with some valuing the combined entity at around 11x forward Ebitda. Guilherme Assis, equity analyst with Raymond James, says deals in the sector have been going for around 7-8x Ebitda. However, that benchmark is primarily based on acquisitions done by Brasil Pharmaceuticals, the sector’s most active consolidator, and comes from looking at smaller acquisitions with fewer competitive advantages. Drogasil is perhaps a fairer comparison and it has been trading at around 10.5x forward Ebitda, which Assis sees as fair value, and is now at 11x after a 17% run-up in the company’s stock in recent days. Although Drogasil is the larger entity, analysts say Droga Raia is more likely to be the acquiring entity. “Droga Raia has more ambition,” says Iago Whately, equity analyst with Fator. He says the Pipponzi family, which controls Droga Raia, is unlikely to want to part with its controlling stake in the company. “The family controls and works in the company. They don’t want to leave the business, whereas Drogasil is controlled by an investor.” Drogasil is controlled by Carlos Pires Oliveira Dias, a member of the Camargo Correa family, which does not work in the business and sees the investment as a passive one, adds Assis. Although negotiations are ongoing between the two parties and no structure has been decided on yet, analysts say a deal is likely to consist of a share swap rather than a cash offer. “They have to keep the expansion plan. They cannot afford to lose a year or two of growing potential,” says Whately. Furthermore Drogasil may be reluctant to increase debt levels after recently reducing leverage ratios to a comfortable level. “Now that they have the cash, I don’t think they’re willing to lever up again just to do the deal. A share swap is more likely,” Assis says. The combined entity would control around 10% of the pharmaceutical market, putting it
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Fitch Upgrades Petrobras Argentina to BB
Fitch has upgraded Petrobras Argentina to BB from BB minus, with a stable outlook, putting it two notches above Argentina’s country ceiling. The agency cited strong credit metrics, a competitive cost structure, strong internal cash flow, USD denominated export revenues, and support from the Brazilian parent. Another plus is the company’s ability to keep up to 70% of its export revenues offshore. Earlier this year, it further reduced Argentine export flows through asset sales. The agency expects the company’s net-debt-to-Ebitda ratio to drop below1.0x from the1.2x seen on March 31. Of the $1.3bn in total debt, $587m comes from capital market transactions, Fitch adds. “Low leverage mitigates any cash shortfall should price trends reverse or capex needs rise above current levels,” it says.
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GP Investments Buys Fogo de Chao
PE firm GP Investments has acquired the remaining 65% stake in Brazilian restaurant operator Fogo de Chao Churrascaria it did not already own. According to S&P, the Brazilian firm intends to partially finance the deal with a $195m, 7-year term loan and a $10m, 5-year revolver, which JP Morgan was heard leading. GP acquired its original, 35% stake in the company in 2006.
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Minerva Convert Uncertain Amid Market Pain
The fate of a convertible debenture sale from Brazil’s Minerva was unclear Wednesday evening, after the issuer extended the bookbuilding period by one day and sought to set a price Wednesday night, targeting BRL300m. The results were expected by this morning for what has been touted as the Brazilian market’s first-ever public sale of mandatorily convertible debentures, which was heard struggling to fill order books as risk markets continued to sour. “In this market nothing is getting done. There is zero international money going into Latin America,” says an ECM banker away from the deal. The volatility is due not only to concerns about debt problems in the US and the euro-zone, but also to increased worries about the domestic picture in Brazil, he adds. Equity transactions from Copersucar and Union Agriculture Group have been pulled in the last week, and Abril Educacao priced below its range. Minerva is looking at a reoffer price of between 97.00-103.00 of face value, with the interest rate and conversion price range established prior to bookbuilding. The bonds are to pay interest at 100% of DI, with the minimum and maximum conversion prices set at BRL6.00 and BRL8.00, respectively. Proceeds are marked for the repayment of existing debt, and for working capital. Minerva is rated BBB minus on a national scale. Goldman Sachs, Deutsche Bank and Banco do Brasil are leading. Officials at the company and the lead managers did not comment or did not return requests for comment Wednesday.
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Nextel Mexico Gets CDB Loan
Nextel Mexico, the operating subsidiary of NII Holdings, has signed an agreement with China Development Bank for a $375m loan. The loan will fund the purchase of Huawei Technologies’ 3G network infrastructure. The financing has a final maturity of 10 years with a 3-year drawdown and a 7-year repayment term. The company did not return calls regarding the rate of the loan.
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NR Finance Prices Floater
Mexico’s NR Finance priced MXP2.5bn ($215m) in 3-year floating rate bonds in the domestic market, coming at TIIE+50bp, or 5bp tight to guidance after generating MXN3bn plus in demand. Pension and mutual funds were the principal buyers. The Nissan leasing subsidiary was expected to price last month but halted plans to issue after regulators required more time to enquire about guarantees from the parent. With regulations becoming more stringent across Latin America, greater transparency is being sought from issuers in an effort to protect and encourage pension fund participation in bond issues, bankers say. NR Finance plans to use the funds for working capital. HSBC and Scotia managed the sale, rated AAA from Fitch on a local scale. The borrower last came to market in November 2010, when it issued MXP2.8bn in 3-year bonds, priced at 65bp over TIIE.
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Suramericana Takes Hit on S&P Watch
Grupo de Inversiones Suramericana’s new 5.7% 2021 bonds took a hit Wednesday when S&P placed its BBB minus rating on creditwatch negative following the Colombian conglomerate’s move earlier this week to acquire some of ING’s Latin American assets for $3.8bn. The bond slipped a good point in secondary market trading to close Wednesday at around 99.375-99.750 after opening around 100.50-101.00. “I think it was a bit of an overreaction initially,” says one trader. “The move was precautionary and depends on whether the company degrades its ratios too much.” Some analysts had already taken note of what they thought was a high price for the Dutch company’s insurance and financial assets in Chile, Mexico, Peru, Uruguay, and Colombia. According to S&P, Gruposura is expected to pay for the acquisition through cash, which includes proceeds raised when the company issued the 2021s in May, as well as financing from international investment funds. “We believe that the incremental indebtedness derived from the transaction could potentially weaken the company’s credit profile. Our previous expectation was that the company would maintain a net debt-to-operating cash flow ratio at less than 1.0x,” the agency said. S&P said it is awaiting completion of the acquisition and more clarity on financing before taking further action. The 2021 issue generated some $4.7bn in demand when it first priced in May at 99.354 to yield 5.786%, or UST+ 260bp, the tight end of UST plus 265bp plus/minus 5bp guidance. Bank of America Merrill Lynch and JP Morgan acted as leads.
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Elektra Preps Pricing After Releasing Guidance
Mexican Retailer Elektra is out with guidance of 7.5% area on a $350m RegS 7-year NC4, falling in line with earlier investor estimates of 7%-8% and coming at the tight end of mid-to-high whispers. Books are closing this morning and pricing is expected as soon as today. By early Wednesday leads were receiving sufficient orders to hit the$350m target, and while some international investors have been somewhat ambivalent about the credit, locals are thought to like a name that is well known in Mexico. Accounts from Latin America, Asia and Europe are also heard to be showing interest. At 7.5% area, pricing is seen as fair from a relative value perspective with some eventual upside in secondary trading. “For new issue liquidity or some diversification, do it,” writes one trader. “But it doesn’t light my fire tremendously. More campfire than bonfire.” As comps this trader was looking at Mexican financial names such Financiera Independencia and Credito Real, which have 2015s trading at 7.9% and 8.0%, as well TV Azteca’s 2018s which have been quoted at around 7.1%. Whether TV Azteca will be able to come at the tight end of the 7.5% area is still a matter for debate, with some investors already drawing a line at the level. “If it is tightened below 7.5%, we will not participate,” notes a European bond investor who has both TV Azteca and Mexican retailer Famsa in his portfolio. Famsa 2015s have been trading at around 8%. Investors are told the company plans to use $250m from bond proceeds to finance debt with the remainder for capex plans. The unsecured notes have a BB Fitch rating. BCP, Jefferies and UBS are leads.