Grupo Virgolino de Oliveira (GVO), a Brazilian sugar and ethanol producer that is the largest member of the Copersucar coop, plans to meet investors to discuss a debut 2018 NC4 dollar bond. GVO’s competitor Cosan is a familiar name to bond investors and analysts had tipped the Brazilian sugar sector as a source of new high yield debut issuers to give the buyside the spread it craves. There is no size officially indicated, though Moody’s spots it at $250m in a ratings report assigning a B3 mark. GVO is scheduled to begin meeting investors Friday in Switzerland. It will visit London, New York, Boston and possibly additional locations, finishing January 20. The notes are rated B3/B, which could see it price at a double-digit yield, according to an analyst and a banker away from the trade. BTG Pactual, Credit Suisse, Itau and Santander are managing the sale. The company was founded in 1921 and operates 4 mills in Sao Paulo state. Despite being in a volatile industry, Moody’s notes improved profitability and cashflow in 2009-2010, thanks to increased operating efficiencies after the launch of 2 new plants. “The completion of the $250m issuance is key to align Virgolino’s debt maturity schedule to current cash flow generation level,” the agency says. It expects further deleveraging measures over the next 18 months.
Yearly Archives: 2011
Banco do Brasil Goes Euro
Banco do Brasil (BdB) is planning to issue a euro-denominated bond, according to investors following the bank’s European roadshow this week. The bank is heard considering a 5-7-year deal for about EUR500m-EUR750m, which would be similar to recent euro debuts from other large Brazilian issuers such as development bank BNDES and telecom Telemar. Timing is still unclear, but a deal would be expected Friday or next week, with the bank scheduled to conclude roadshows today. BdB, Votorantim, Deutsche Bank and BNP Paribas are managing the process. The bank’s last sale was a $600m 2020 tier 2 bond in September, through BAML, HSBC and Votorantim. European investors hungry for diversity have welcomed high-quality Brazilians in recent months, with Telemar (BBB/Baa2) raising EUR750m in 2017s at a 5.330% yield in December, after BNDES (BBB minus/Baa2) got an identical size and maturity at 4.243% in September.
Panama Close to Samurai Issue
Panama is eyeing next week for its debut Samurai bond, according to a source with knowledge of the transaction. The sovereign met Japanese investors in November, and at the time finance officials said they would seek a $500m equivalent 10-year yen-denominated bond featuring a guarantee from JBIC, in a transaction likely be completed in January. A public credit official declines to comment on the timing. Daiwa and Mitsubishi are managing the sale. The sovereign had been aiming for a coupon under 2%. Mexico was the region’s most recent sovereign yen issuer, selling JPY150bn 2020 with a 1.51% coupon in October.
Investors Leap on Brazil Mid-Cap Bank Test
Banco Cruzeiro do Sul is the first Brazilian bank to issue new dollar debt since last year’s troubles at Panamericano raised concerns about the country’s mid-sized banks and prompted regulatory change. The bank raised $400m on more than $1.5bn in orders, according to bankers on the deal. The Ba2/BB minus 2016 bond priced at 99.498 with an 8.250% coupon to yield 8.375%, the tight end of 8.500% area guidance. The bond traded up slightly Wednesday afternoon, according to investors. The yield compares to the 8.0% at which the bank’s 2015 bond traded, according to investors. “Cruzeiro has paid a premium, as the consumer lenders should be impacted more [by regulatory changes],” Natalia Corfield, EM credit analyst at ING, tells LatinFinance. She notes a 2020 subordinated bond from Brazilian peer BMG (Ba2/BB minus) trading at 8.4%, and imagines a new bond from Daycoval (BB) – starting investor meetings today – could come tighter than Cruzeiro. Corfield explains that new banking regulations in Brazil proposed after Panamericano should have more of a negative impact on consumer-focused lenders, like Cruzeiro, than those with corporate focus like Daycoval. Proceeds from the sale will be used to expand the bank’s capital base. Barclays, BCP Securities and UBS managed the sale. Cruzeiro’s last DCM deal had been a $400m 2020 Tier 2 bond, sold in September at a 9% yield, through the same trio.
Daycoval Hits Bond Road
Brazil’s Banco Daycoval is set to begin a non-deal road show today, a day after Cruzeiro do Sul brought the first bond from Brazil’s mid-size bank sector following last year’s problems at Banco Panamericano. The bank was to begin in Hong Kong, and visit Singapore, Miami, London, New York and Switzerland, finishing in Boston on January 19. Goldman Sachs, HSBC and Standard Chartered are managing the sale. BB rated Daycoval last sold a dollar bond in March 2010, raising $300m in 2015s at a 6.750% yield.
Cencosud Plays DCM Debut Safe
Chile’s Cencosud has raised $750m in new 2021 bonds, marking its dollar debut. The Baa3/BBB minus Chilean supermarket chain decided to play it safe in its first cross-border deal. It had been heard initially considering up to $1bn size and mulling a global peso tranche. The bond priced at 98.783 with a 5.500% coupon, to yield 5.661%, or UST plus 230.0bp, the tight end of 237.5bp guidance but wide to the 225.0bp it had first whispered. Demand for the deal reached $2.6bn, according to bankers on it. It traded up slightly Wednesday afternoon, according to investors. The enthusiasm to be expected for an investment-grade Chilean dollar debutant appeared to be somewhat dampened by concerns about ambitions capex, high leverage (3.3x, estimates Barclays) and 30% Argentine exposure, investors say. However, they see the bond as fairly priced, with little potential for tightening. “We see 20bp-30bp of upside potential from issuance levels,” says Barclays. The bank compares Cencosud to US BBBs Kroger and Safeway, which trade at UST plus 110bp and 135bp, respectively, and notes that the Chilean sovereign is UST plus 70bp. “The [230bp] level is fair, but not a compelling price,” says a West Coast EM investor who looked at the deal. He notes elevated leverage and questions about expansion plans, but sees room for 15bp-20bp tightening. Proceeds are marked for debt refinancing and general corporate purposes. Deutsche, JPMorgan and Santander ran the sale, done at the Cencosud SA holdco level, and guaranteed by the Chilean Cencosud Retail SA operating company. Cencosud operates 667 stores in Chile, Argentina, Brazil, Peru, Colombia. This includes Chile’s Jumbo and Santa Isabel supermarkets, and Brazil’s Bretas, acquired in October for BRL1.35bn.
SiLAS: Securitization and Structured Finance in Latin America
For too long now, the talk has been about resilience of the Latin American market during the financial crisis and the lessons learnt from the melt down. The time for retrospection is over and it’s time to look forward. This year’s event focuses on the growth areas and products which promise to stem the tide of negative rhetoric which surrounds the securitization market.
Fitch Positive on Braskem
Fitch has improved the outlook of the BB+ rating of Brazil-based petrochemical company Braskem to positive from stable. The positive outlook reflects the agency’s expectation of ongoing improvements in the company’s operating cash generation, which it says should result in reduced leverage while maintaining strong liquidity, sufficient to cover scheduled amortizations in the next 2 years. Fitch expects a net debt to Ebitda ratio for 2010 to land below 3.0x, moving closer to 2.0x in 2011 and 2012. It also expects to see synergies from Braskem’s integration of Quattor’s, estimated by the company at around BRL235m in 2011 and BRL400m in 2012. Braskem acquired Quattor for BRL7.56bn in January 2010.
Moody’s Turns Negative on Javer
Moody’s has changed the outlook on Mexican homebuilder Javer’s Ba3 unsecured debt rating to negative from stable. It cites the deterioration in Javer’s operating results in 2010 as a result of reduced housing inventory and delays in titling on new housing construction, which will continue to pressure the company’s key credit metrics and operating statistics, possibly challenging covenant compliance. About $210m in securities are affected, Moody’s says.
Moody’s Downgrades Su Casita Notes
Moody’s has downgraded the 2035 Class A Insured Residential Mortgage Floating Rate Notes of Mexican mortgage lender Su Casita to B3 from B1. The downgrade was based on the continuing deterioration of the collateral’s performance and Moody’s updated projection of lifetime cumulative gross defaults. The underlying collateral consists of first-lien, fixed-rate mortgage loans denominated in UDIs and granted primarily to low-income borrowers in Mexico, Moody’s says.