Category: Brazil

Moody’s has assigned a Ba2 rating to Invepar’s 10-year BRL450m amortizing local unsecured debentures that are guaranteed by the Brazilian infrastructure company’s subsidiary Linha Amarela (LA). The outlook is stable. The rating action reflects LA’s stable and predictable cash flow of the guarantor, which is supported by a long-term concession contract for toll road services. LA, says Moody’s, also has strong credit metrics for the rating category and a relatively long track record of improving operating performance since 1998. Proceeds of the issue will be used to capitalize Concessao Metroviaria do Rio de Janeiro, its Rio subway subsidiary through the acquisition of 10-year bullet payment debentures to be issued by Metro Rio. The latter will primarily use the proceeds of these private debentures to amortize existing short-term debt estimated at around BRL170m and fund the acquisition of new train cars of around BRL280m.

Banco Cruzeiro do Sul has raised $250m in new 2015 bonds, fitting the issue in before the Brazilian Carnival holiday amid continued volatility in the global markets. The Ba2 offering priced at 99.007 with a 8.500% coupon to yield 8.750%, in line with 8.750% area guidance. Bankers on the deal spot the demand at about $280m from more than 100 accounts. BCP and BTG Pactual managed the 144a/Reg S sale, marking a debut for the latter in this market. Cruzeiro sold $175m in 2012 bonds in September to yield 8.5%, also through BCP. A general decline in risk appetite has not deterred some Brazilian banks from issuing, with Banco Votorantim pulling off a $500m 3-year deal earlier this month. However, larger expected issuers heard wanting 10-years, such as Bradesco and Itau, appear to be waiting.

Brazilian steel and mining operator CSN has raised its bid for shares of Cimpor to EUR6.18 per share from EUR5.75, bringing the valuation for the target’s 672m share to EUR4.15bn. CSN also lowered its minimum acceptance target 33% plus 1 share, from 50% plus 1 share, conceding it is now impossible to acquire a controlling stake since Votorantim and Camargo Correa have accumulated stakes and agreements that give them a combined 52% of Cimpor. Separately, Portugal’s Diario Economico newspaper reports Monday that CSN in talks to buy a 20% stake from minority shareholders Manuel Fino and the pension fund of Portuguese bank Banco Comercial Portugues, which each hold 10% of Cimpor. Last week, Camargo acquired a 6.5% stake in Cimpor belonging to Bipadosa, which, added to the 22.2% stake it had acquired from Teixeira Duarte, brings its holdings to 28.7%. Votorantim has accumulated a 17% stake through a share swap with Lafarge and formed a bloc with Caixa Geral de Depositos, which owns 10%. If CSN succeeds in acquiring close to a third of Cimpor, three competing Brazilian companies will have roughly equal holdings, with none carrying enough influence to single-handedly effect a change at Cimpor. Brazil’s antitrust agency is also reported to be preparing an investigation into Camargo’s and Voto’s participation in Cimpor, which may have cartel implications for Brazil’s cement industry.

Fitch has downgraded the ratings of Brazilian industrial conglomerate Camargo Correa to BB minus from BB after the company announced it had purchased a 22% share in Cimpor for EUR961m. The outlook was revised to stable from negative. “The downgrade reflects the leveraging effect this transaction will have on Camargo’s credit protection measures, which were already weak for the rating category on a net debt basis,” Fitch says. Camargo’s net debt is expected to increase to BRL10.1bn from BRL 7.7.bn on a pro forma basis. Its pro forma net leverage ratio would climb to 3.5x from 2.7x. However, Fitch says the deal allows Camargo to increase its presence in global cement, and it should result in synergies with Camargo’s highly correlated core cement, engineering and construction businesses.

Camargo Correa is acquiring 22%-25% position in Cimpor, driving Brazil Inc’s pursuit of the Portuguese cement company into an awkward stalemate. Camargo bought a 22% share in Cimpor that belonged to Portuguese engineering firm Teixeira Duarte for EUR6.50 a share, valuing the deal at EUR961m. Moody’s says Camargo will partially fund this with long-term debt rather than cash. The cement specialist says it has purchased the option to acquire an additional 3% from third parties, making it the single largest entity to own a piece of Cimpor. The race is on to secure remaining smaller pieces of the company held by minority investors, say people close to the process. The next largest holder is Votorantim, which last week secured a 17% stake in Cimpor through a share swap. It also formed a shareholder agreement with Caixa Geral de Depositos, which owns 10%, turning the pair into a single bloc with 27%. “There are still remaining stakes [to go after,]” says an executive close to Camargo. “This soap opera isn’t over yet,” he adds. Among minority shareholders in Cimpor are Manuel Fino (11%), BCP’s pension fund (10%), Bipadosa (7%), Cinvest (4%) and the public (19%), according to Cimpor. The lunges from Voto and Camargo effectively shatter CSN’s bid to acquire a controlling stake in Cimpor, which is being done through a public tender that expires February 17. CSN seeks a controlling stake and up to 100% of the company. Its EUR5.75 a share offer via a cash bid has been rejected by Cimpor’s board, but could still draw interest from would-be sellers, estimate some analysts. If CSN acquires all of the stakes that have not been consumed by its compatriots Voto and Camargo, it could get 48%, though that seems unlikely at this point, given the offer is well below what Camargo paid. If it did, however, it would jointly own the company alongside the 2 Brazilians it is trying to steal market share from. Elsewhere, CSN has gone to Brazil’s antitrust regulator to file a complaint about the

In a novel development for LatAm platform financing, 2 issuers are turning to the bond market as bank lenders hit capacity. Mexico’s Grupo R and Brazil’s Schahin are preparing bonds to fund offshore drilling after having relied almost exclusively on banks in recent years. Following pushback in December, Grupo R has retooled a plan to raise $463m in 5-year funds in the loan market via BBVA. The problem, say syndicators, is that some banks were not comfortable with Pemex’s variable day-rate contract, which increases the risk of the deal from a creditor’s standpoint. The new plan involves having its RDS Ultra-Deepwater subsidiary issue $260m in 2017 NC4 bonds via Jefferies. It will also do a 5-year loan, expected at $225m, on the same terms as planned earlier. This means paying Libor plus 375bp in the first 2 years, 400bp in years 3-4, and 425bp in the fifth year, with juicy up-front fees of 300bp. The bonds are subordinated to the loan and a new cash sweep feature for the latter has helped get lenders comfortable with the combo. A US and Europe roadshow for the 144A/RegS bond begins today, ending February 23. Elsewhere, Grupo Schahin is heard readying a new $310m 6.5-year bond via Nomura for its Lancer platform, which in September renewed a 7-year contract with Petrobras. The 32-year old Lancer platform has typically relied on bank financing, the last of which was done in 2005. But with Schahin having just renegotiated a $800m 10-year contract for its troubled Black Gold platform, and the jumbo Black Diamond twin drillship seeking $1.4bn in 2010, the company is rightly concerned that banks may be hitting capacity for the its debt. “These guys need money,” says one syndicator. “I hope [the bond] gets done, but I have my doubts,” adds another lender. Lancer is apparently contingent on the notes receiving an investment grade rating. A bank market participant familiar with the borrower estimates the coupon could easily hit double digits given the quality of the collateral

Moody’s has chopped the rating on Brazil’s Lupatech to B2 from B1, amid continued cashflow and operating margin pressures. “Even though Lupatech has likely benefited from the resumption of bids for equipment and services in late 2009 by its most important client Petroleo Brasileiro, the conversion of the additional backlog into sales and cash flow should only materialize over the longer term,” it says. Moody’s notes that operational inefficiencies derived from persistent low capacity utilization are likely to continue. It sees total adjusted debt to Ebitda peaking at 13.0x in the first half 2010, up from 8.8x in September. The agency put the oil and gas equipment manufacturer under review in November. At the time, Lupatech was wrapping up a 7-month liability management operation that featured a BRL121m credit facility from the BNDES and a BRL320m 2018 convertible debenture sale that was 90% bought by BNDES. Lupatech also recently got debentures holders to waive breached financial covenants and postpone the next verification date to December 2010, when Moody’s expects Lupatech to be back in compliance with financial covenants. Lupatech has $275m outstanding in 9.875% coupon perpetuals. The rating outlook is stable.

CSN has borrowed BRL1bn from Caixa Economica Federal through a bank credit transaction known as a CCB. Funds obtained from the 3-year deal under the government-owned bank’s Credito Especial Empresa program will be used for liability management. It obtained BRL2bn through a similar 3-year deal from CEF in August to obtain working capital. The Brazilian steelmaker is currently undergoing a public tender process for the outstanding shares of Portuguese cement maker Cimpor.

Brazil homebuilder Gafisa says it plans to issue BRL900m-BRL1bn of equity in the coming weeks. The move follows a substantial recovery in Gafisa’s stock price since it withdrew plans to place around BRL700m in equity last June. The company’s announcement last year prompted a selloff of more than 10% of the stock price, which in turn led Gafisa to scrap plans to issue. Since mid-June, however, Gafisa shares have risen more than 50%, making an attractive issuance point for the homebuilder. Proceeds are earmarked for land acquisitions, M&A, new launches, working capital and investments in existing projects, says Gafisa in its prospectus. Itau BBA and JPMorgan are leading the offering, whose prospectus does not detail a precise timeline. In Q4 2009, Gafisa approved a plan to issue BRL600m in 2014 local debentures via Caixa Economica Federal. But the issue was never printed, according to the CVM.

Brazil is a good candidate for OECD membership and Colombia may also make the grade, secretary general Angel Gurria tells LatinFinance. “It depends on Brazil. We are ready to start the process anytime Brazil is ready,” says Gurria. He declines to speculate on timing. The OECD has been inviting Brazil since 2007 to join an enhanced engagement process with a view to possible membership. The former Mexican finance minister says the outlook for Brazil is stable, and he does not expect a change of president to be a market event. “There’s much less uncertainty,” says Gurria. “There’s also in Brazil a culture of stability now, and certainly a culture of avoiding big deficits and inflation. When you have been there, you don’t want to go back.” Meanwhile, Colombia is in the OECD’s development center and a potential member of the international economic organization. “Colombia has a lot of conditions that would allow it to be an interesting and important candidate,” says Gurria. Mexico and Chile are the only OECD members from LatAm, following the latter’s accession in January.