Category: Brazil

As widely expected, Brazil’s central bank left its monetary policy rate unchanged at 8.75%. The bank says the decision was unanimous. Goldman Sachs believes the bank will start raising rates by 50bp in April, followed by three hikes of 75bp per meeting, and two last hikes of 50bp each. This would raise the rate to 12.50% by December 2010. Bank of America Merrill Lynch, meanwhile, says it does not take a rate hike in 2010 for granted and expects it to remain at 8.75%, although it notes there are risks to the upside, particularly in the second half.

Telemar, which operates under the Oi brand in Brazil, is in talks with the Bank of China to raise a sizable loan. The company is looking to conclude the discussions by year-end, according to a company official, who declines to provide specifics on size and pricing. Earlier this week Alex Zornig, CFO of a Telemar unit Tele Norte Leste Participacoes, told Bloomberg the company is in talks with the Chinese state bank for a 10-year facility. The company official notes the facility is connected to an equipment contract with China’s Huawei, which produces mobile and broadband technology. In March, Telemar obtained a $300m 7-year loan from China Development Bank (CDB) at Libor plus 250bp, also in connection with Huawei equipment. The following month, America Movil clinched a $1bn 10-year loan also from CDB and in connection with an equipment purchase from Huawei. Pricing on that facility was heard just above the Libor plus 100bp area.

MPX, the integrated Brazilian power generation company, has secured a BRL1bn 17-year BNDES facility to help it develop a 360MW coal-fired thermal plant in the state of Maranhao. The financing for the Itaqui power plant has a 14-year amortization period and 3-years’ grace through July 2012. It includes a BRL797m direct loan at TJLP plus 278bp and indirect lines totaling BRL241m. Of the latter, BRL100m pays the inflation index IPCA plus 12.1%-12.6% and BRL141m pays TJLP plus 4.5%-5.0%, according to MPX. MPX says it also expects to receive BRL203m in long-dated financing from Banco do Nordeste do Brasil (BNB), which is in the final stages of approval. Both loans will leave the project with a 75% debt to 25% equity ratio, in line with the company’s other projects that fall within the government’s growth acceleration program. MPX is among the most active project developers in Brazil, and distinguishes itself by powering its plants with coal, as opposed to hydro.

Morgan Stanley says Brazil’s central bank should once again stay on hold today and keep the policy interest rate unchanged at 8.75%, in line with consensus. “The central bank is not in a hurry to hike rates. It judges that there is still slack in the economy, inflation is under control, and near-term inflation prospects look benign,” it adds. Bulltick agrees with consensus, and expects the bank to hike to rate by a maximum of 150bp by the end of 2010 as inflation remains within the target range and growth slowly converges back to potential. BofA-Merrill Lynch, meanwhile, says it does not take a 2010 rate hike for granted and expects it to remain at 8.75%, although it notes there are risks to the upside, particularly in the second half.

Brazilian electricity distribution holding Rede Energia’s roadshow to promote a BRL370m ($213m) 5-year non-convertible bond issue has taken off and is scheduled to end on December 10, the company says. Rede says the A rated issue will be made in a single tranche and that it will pay a maximum of 3.4% over DI. Proceeds will be used to pay down short-term debt. Banco do Nordeste is managing the sale. Separately, the board of Brazilian cosmetics company Natura has authorized a single-tranche BRL350m promissory note issue. The notes will pay a maximum of 106% of the DI rate and will be due in 180 days. Proceeds will be used to refinance short-term debt, the company adds. Natura is one of Brazil’s leading manufacturers and marketers of skin care, solar filters, cosmetics, perfume and hair products.

Parana Banco will try to give investors one last mid-sized Brazilian bank bond by year-end. The paycheck deductible loan specialist will hold December 14-16 a US, European and Latin American roadshow to pitch a $100m 2012 bond. Guidance on the B+ Reg S issue has been set at 7.50%-7.75%. Proceeds are tagged for general corporate purposes. Jeffries and Queluz are managing the sale, expected to price last next week. Parana’s last dollar bond was squeaked out just before the crisis, a $35m 7.875% of 2010 bond in August 2008.

Brazilian educational company Anhanguera Educacional has issued 29.00m units at BRL22.50, a 1.7% discount to the last trade before pricing of BRL22.90. The BRL653m deal, which was filed on November 25 was done quickly and without hiccups, say bankers on it. However, in the 5 sessions leading up to pricing, the shares fell 8.4%, underperforming the Bovespa, which dropped 1.0% in the same period. Each unit is comprised of 6 preferred shares and 1 common share, which allow the company to raise capital while adhering to the Brazilian law that prohibits foreigners from owning a majority stake in domestic education companies. Underwriters will look to trade into the market an additional 4.35m unit greenshoe in the coming sessions, which could bring the total proceeds to BRL750m. All of the proceeds from the sale will go to selling family members of the controlling and founding family. The deal was led by BofA-Merrill and Itau BBA with Santander and Credit Suisse as joint bookrunners. Still in the equity pipeline are Fleury, the diagnostics lab, and IMC, the restaurant holdco held by Advent. The 2 are slated to price on December 15 and 17, respectively.

Brazilian consumer products company Hypermarcas has continued its shopping spree, acquiring generic medication maker Laboratorio Neo Quimica for BRL1.4bn. Hypermarcas will pay BRL687.7m in cash in 3 installments, and issue 15.5m common shares to finance the deal. Hypermarcas says it will merge its subsidiary Hypernova, which makes over-the-counter medicines, with Neo Quimica. In September, local press had reported that Pfizer was interested in acquiring Neo Quimica, whose 2009 Ebitda is about BRL95m, according to Hypermarcas. The deal was privately negotiated. Earlier this year, Hypermarcas was very active in the Brazilian M&A scene, also acquiring the Jontex condom brand from Johnson & Johnson, Brazil condom maker INAL, hygiene products maker Pom Pom and cosmetics company Hydrogen.

Fitch has upgraded the ratings of Brazil-based America Latina Logistica (ALL) and its subsidiaries and kept the outlook stable. The IDR of ALL was lifted to B+ from BB minus and its fifth and sixth debenture issues were upgraded to A minus from BBB+. Meanwhile, the third debenture issue ratings of subsidiary ALL Malha Sul went to A minus from BBB+, the sixth debenture issue ratings of ALL Malha Norte were upgraded to A minus from BBB+. The same action was taken with ALL Malha Paulista’s first debenture. Fitch says the upgrade is supported by the company’s strengthened financial profile following the successful capital injection of BRL1.29bn in November. The rating agency expects that the strong liquidity position of BRL2.2bn in cash and marketable securities at the end of September 2009 should be significantly strengthened as a result of ALL’s successful capital injection.

Brazilian retailer CBD, the parent of Pao de Acucar, says in a filing that it is planning to issue BRL500m in non-convertible debentures due 2014. The notes will pay an annual interest rate of 109.5% of DI. Banco do Brasil’s investment banking arm is managing the sale.