Category: Brazil

Brazil’s Vivo plans to sell BRL810m in domestic bonds, up from the BRL600m it originally planned. The wireless operator is preparing 3 tranches of 2019 bonds, amortizing in succession. A BRL98m first tranche pays 108% of DI rate, a BRL640m piece pays 112% of DI, and a final BRL72m fixed-rate tranche pays 7%. Proceeds are headed for repaying Vivo’s outstanding promissory notes and to reinforce working capital. Itau is coordinating the sale, rated AA on a national scale. Vivo is building books this week, according to a timetable in the prospectus, and expects final regulatory approval Monday. Vivo is jointly controlled by Spain’s Telefonica and Portugal Telecom. Itau BBA is leading the debenture.

Brazil’s Gafisa is planning a BRL600m 2014 domestic bond issue. The real estate developer’s board has approved plans for the sale, which must now be approved at a shareholders’ meeting November 16. Gafisa shelved plans in June for a BRL700m equity sale after its stock slid 11%.

Potential bidders considering paying GVT shareholders more than Telesp’s BRL48.00 a share offer, made last week, run a series of risks, say analysts. For Vivendi, which put in the first bid at BRL42.00 for the Brazilian telecom and is reported to be considering topping Telesp, the main risk is overpaying. Any new bid must be BRL50.40 per share or higher, according to Brazilian tender offer rules. “Considering the BRL48.00 a bid values GVT very well, we don’t think Vivendi or another company in the sector will be able to make a higher offer,” says Banif-Ixe. Vivendi has no telecom business in Brazil and thus cannot reap the same synergies as Telesp, says an executive familiar with the latter’s view. Telmex International’s Embratel could, however offer a compelling bid from an operational standpoint. “Telmex International may have the capacity to lever up to acquire the company, but it would probably threaten its ratings,” notes Sergio Rodriguez, telecom analyst at Fitch. He notes that the latest numbers for the company show $400m in cash on hand, debt of around $2bn and a leverage ratio of 1.4x. However, spending big on GVT, which has analogous businesses to Embratel’s Vesper and Vesper Sao Paulo, might leave it short on cash and leverage capacity if and when an opportunity to acquire a controlling stake in NET Servicos arises next year, says Rodriguez. GVT is holding a shareholders meeting November 3 to waive its poison pill clause to allow for a takeover at BRL48.00 a share. Telesp’s tender offer for the company expires November 18. JPMorgan and Santander are advising Telesp. Credit Suisse is advising GVT, and BNP Paribas is helping Vivendi.

Scotiabank is considering growth in Brazil as part of a strategy to remain diversified in emerging markets. “We don’t necessarily have to buy a bank, we already have a rep office in Brazil,” Scotia’s global CEO Rick Waugh tells LatinFinance. “We could apply for licenses and build generically, or maybe a little bit of both. We’ve got to keep all our options open,” he says in a recent interview. Longer term, the Canadian bank is also looking at doing more in Colombia and Central America, but it is currently focused on countries where it is already present. Waugh estimates that EM represents 30% of Scotia’s global bottom line, with LatAm approximately two thirds of that. “It is emerging markets – if you look over the next 3 years – versus the developed countries, where we see the better growth coming from,” says the banker. “Throughout this whole crisis, we have stayed profitable every quarter because of the whole diversification, which LatAm contributed to,” he adds. Waugh also notes that the Caribbean units are a key component of the Canadian bank’s global operations. “It’s a very important contributor to our results . . . It is very sustainable and gives us a good diversified source of revenue.” Scotia claims to be the third largest bank in Peru and the sixth largest in both Mexico and Chile. It is also a major player in the Caribbean, particularly Jamaica, and is present in 6 countries in Central America. It also has a rep office in Venezuela. Scotia is the third-largest bank in Canada by market cap, at $46bn.

Investor desire for Brazilian risk shows no sign of cooling, as Odebrecht Finance sold Wednesday $500m in 10-year bonds, upsized from $300m on the back of more than $2bn in demand. The Brazilian builder’s funding arm followed the previous session’s heavily oversubscribed jumbo perp from Banco do Brasil with a 2020 NC5 priced at 98.184 with a 7.000% coupon to yield 7.250%, or UST plus 382.3bp, the tight end of 7.250%-7.375% yield guidance. The issue was heard trading up 1.00-1.25 points in the gray Wednesday afternoon. Investors note a positive credit trajectory of the last few years, as well as a wave of construction projects coming from the 2014 World Cup and 2016 Olympics. “It offers a decent premium. If they wanted to, they could have priced a bit tighter,” says a participating EM dedicated investor, adding that the strong Brazilian construction credit offers a hedge against any downturn affecting raw material prices. “Their investors wanted liquidity and now they have given it to them,” says a banker away from the deal. HSBC, Santander and Banco do Brasil managed the sale. Construtora Norberto Odebrecht guarantees the bonds, rated BB+/BB. Proceeds go towards general corporate purposes, including additional equity investment in its subsidiaries. Odebrecht brought in April Brazil’s first overseas corporate high-yield issue since the start of the crisis, placing $200m in 2014 notes through Itau and Santander.

BTG Pactual’s Fundo Brasil Energia is investing BRL300m in ERSA, a Brazilian company dedicated to renewable energy. The capital infusion will allow ERSA to finance expansion. “Our objective is to generate more than 1,000MW within 5 to 7 years,” says ERSA chairman Otavio Castello Branco in a statement. ERSA operates 3 hydroelectric dams and has 8 more under construction, which are expected to become operational in 2010. Other ERSA investors are New York-based Eton Park (28%), Patria Investimentos (24%), GMR Empreendimentos Nergeticos (10%), Germany’s DEG (8%), and BBI FIP (7%). Fundo Brasil Energia holds 23%.

Colombia has followed Brazil into the long end, selling $1.0bn in 2041 bonds on about $2.4bn in demand. The sovereign came a little later than expected, but appears to have secured tighter pricing in the process. It priced at 99.597 with a 6.125% coupon to yield 6.155%, or the 2039 UST plus 200bp, matching 200bp-area guidance. Some investors note they took early indications of 15bp-20bp back of the 2037 to mean high-100s, spotting the existing 2037s at around 180bp Friday close. “If they can borrow for 30 years at around 6%, that’s very good,” says Jeremy Brewin, who helps manage about $1bn in EM debt at Aviva Investors, noting the deal was fair value, but not cheap. He adds that Colombia was able to sell into a space created by a rally in the 2037s, and might have paid slightly more 2 weeks ago. “We started to see at the beginning of September that Colombia’s curve was performing well, and that there was strong appetite,” Patricia Moreno, Colombia’s recently appointed deputy director for international capital markets, tells LatinFinance, spotting the new issue premium at 12bp. She says the coupon is the lowest anywhere on Colombia’s outstanding dollar curve, and among the lowest historically. For now this appears to be the final dollar issue of the year, she explains, but Colombia continues to monitor the markets. Bankers away from the deal agree that Colombia got better conditions by waiting, and see additional possibility at the long end for the right sovereign names. The issue was heard trading about flat in the gray market late Tuesday afternoon. The approximately 130 accounts participating included about 55% US, 23% European and 16% Colombian investors, according to a banker on the deal, and went to 50% asset managers. Proceeds will be used to fund 2010 budget needs. Bank of America-Merrill Lynch and Goldman Sachs managed the sale. Colombia had issued $2bn internationally this year, and indicated its intention to add a new long bond this year in early Septembe

Brazil’s Banco Panamericano has indicated yield guidance of 7.25%-7.50% as it takes orders for a 2012 bond during a roadshow set to end Friday. The Brazilian mid-tier bank is visiting Lisbon, Geneva, Zurich, Miami and London, before finishing up in New York. The exact size is to be disclosed later this week, a banker on the deal says. Brazilian banks of this size – a group which includes Cruzeiro do Sul and BicBanco – generally sell bonds between $100m-$250m in volume. Bradesco, Espirito Santo and Itau are managing the sale, which is rated Ba2.

Brazilian power producer Cemig has confirmed its interest in increasing its stake in the consortium that has a controlling stake in Light. The Rio Minas Energia (RME) group, composed of 4 members including Cemig, Equatorial, owned by Pactual, Andrade Gutierrez and a Banif-held fund, controls 52% of the shares of Light, a leading power producer in the Rio area. The BNDES owns the rest. Cemig says it is in talks to acquire the stake belonging to Equatorial, and it has not denied reports it is also interested in Andrade Gutierrez’s stake. If it succeeds in acquiring the two stakes, its ownership of RME would rise to 75%, which would give it an effective 39% stake in Light. Bradesco is heard advising Cemig, according to bankers away from the process. Separately, Cemig is on a non-deal roadshow with Merrill Lynch to discuss its business with investors. The European portion of the roadshow ended Monday in Edinburgh, and today moves to New York, with stops in Chicago, Denver and San Francisco through October 14.