Category: Brazil

Darby Stratus, a joint venture between Darby Overseas Investments and Brazilian private equity manager Stratus Group, has made a mezzanine loan of BRL58m to energy generator and distributor Eletrogoes. Proceeds help finance the construction of hydroelectric and thermoelectric plants in Brazil’s Amazon region, Fernando Gentil, MD at Darby, tells LatinFinance. The loan comes from the Mezzanine Infrastructure Fund, which has BRL387.5m. Gentil says the facility combines fixed income and an equity kicker. The kicker, which makes up about 25% of the loan, will allow the lender to gain participation in the revenue the plants generate, he says. The plants will generate 100MW and should start producing in October. Gentil says this is the first investment the fund makes. “We are looking at opportunities in waste management, logistics companies and other renewable energy projects such as wind power,” he adds.

Shareholders of Natura, the Brazilian cosmetics company, plan to issue 49.3m shares July 30, according to the company’s most recently filed prospectus. The deal, being led by Itau BBA, with JPMorgan and UBS Pactual as joint bookrunners, can be increased by 7.4m units. At Thursday’s closing price of BRL27.88, the 56.7m share deal would yield BRL1.58bn. Natura is known to be the first company to price a modern IPO on the Bovespa, having first offered its shares in 2004 at BRL36.50. That was the company’s last visit to the market.

Brazil’s development bank, the BNDES, is in the process of setting up a new program to issue up to BRL25bn in government notes, proceeds of which are to be used by Petrobras. The program is backed by a new federal law that allows the development bank to issue new securities alongside Brazil’s treasury in a typical government bond auction process, according to a BNDES official. BNDES then takes the notes, which sit on its balance sheet, and transfer them to Petrobras in exchange for a credit spread. As such they sit on both sides of BNDES’ balance sheet – as a liability it has with Treasury and an asset with Petrobras. The latter can then sell the notes to investment banks, which in turn will offer them to institutional investors. It will use proceeds for its capex program. Details on the terms of the notes to be offered and the length of the program are still being worked out, says the official. The law governing the program is Lei 11,948, which was passed in June.

Analysts and bankers following Vale, the Brazilian miner, were mostly bewildered by unsourced local press reports suggesting it was preparing a $25bn bid for US fertilizer giant Mosaic. Vale is fresh off a series of conference calls and meetings with investors related to its $942m convertible, which was placed last week. Bankers involved and analysts who spoke to the company note Vale was clear in stating that it is not pursuing big ticket M&A, instead focusing on smaller acquisitions related to existing strategies. Earlier this week, Vale officials said the company evaluates all opportunities, but there was nothing major on the table to speak of. Mosaic specializes in potash and other minerals used in fertilizers, and is 46% owned by Cargill. While Vale has demonstrated an interest in fertilizer assets – it acquired Rio Tinto’s Brazilian potash assets in January for $850m – it is still largely viewed as a non-core business. “I think this is a new area for Vale. For them to pay $25bn for this seems to me to be too risky right now,” says Gilberto Cardoso, analyst at Banif-Ixe. He adds that the markets are too unstable to justify a major departure in strategy. “While possible, we do not believe Vale is likely to bid for Mosaic and thus, would view significant widening as an opportunity to increase exposure to Vale bonds,” says Barclays. Financing for such a big acquisition, at least for Vale, is likely to be available even in today’s tight bank market. With a roughly $12bn cash position, Vale is seen as having to raise $15bn-$20bn in the debt markets for a cash acquisition of Mosaic’s size. But a banker at one of the company’s main relationship banks insists that there has been no contact with Vale regarding new financing. Banif-Ixe’s Cardoso notes that with an extra $10bn, Vale could acquire Anglo American, a far more attractive asset in terms of scale and diversification metrics. Vale declines to comment on the Mosaic chatter.

S&P has cut to negative its outlook on Lupatech’s BB minus rating, though it assumes the company will successfully refinance a significant portion of debt maturities after obtaining a BRL441m long-term loan from BNDES. “The negative outlook on Lupatech reflects its significant leverage for the rating category, and its considerable debt position, which increases its interest burden and reduces free cash flows,” says S&P credit analyst Piero Parolin. “The negative outlook also reflects our expectation that Lupatech’s financial ratios will recover at a slower pace than we had originally anticipated and that this improvement will depend on significant revenue expansion over next few years.” The ratings reflect the company’s acquisitive growth strategy, contributing to somewhat weak credit measures until acquired companies are fully integrated. S&P also notes pressures on working capital stemming from rising receivables and inventories; aggressive debt leverage and credit metrics; and the expectation that Lupatech will reduce its growth through acquisitions after the recent conclusion of its program. “We also expect the company to refinance a significant portion of its debt maturities over the next 3 years, reducing its interest expenses,” says S&P.

Brazilian markets should continue to rally, with small setbacks, throughout this year, as the country’s economy continues to recover, panelists tell a Brazilian Chamber of Commerce event in New York. “The economy looks a lot better than we expected even just a few months ago,” says Geoffrey Dennis, LatAm equity strategist at Citi, who expects the Bovespa to reach 60,000 by the end of the year, a 22.7% increase from Tuesday’s close of 48,872. He says markets have already hit bottom, and Citi expects a 0.5% contraction of Brazil GDP this year, paving the way to 4% growth in 2010. Although advising clients to be constructive on Brazilian equities in the long term, he warns stocks are a “little expensive,” at about 20x earnings, in the short term. Supported by domestic demand, Brazil is recovering faster than the global economy, and is “well-positioned to be an outperformer,” adds Drausio Giacomelli, head of EM fixed income strategy for Deutsche Bank.

America Latina Logistica has obtained a BRL691.6m 20-year loan from BNDES. The facility will be used to finance the construction, operation, commercial exploration and conservation of the stretch of rail connecting the cities of Alto Araguaia and Rondonopolis in the state of Mato Grosso. The company does not disclose interest rate.

Brazilian companies Vale and Suzano have entered a partnership in the northern states of Para and Maranhao. As part of the deal, Suzano will acquire from Vale almost 85,000 hectares, including preservation areas and eucalyptus plantations, for BRL235m. Meanwhile, Vale will supply wood to Suzano for 15 years starting in 2014 and, starting in 2013, will transport 1.3m tons of pulp per year by railroad, from Suzano’s new unit in Maranhao to the city’s port region for 30 years.

Brazilian regulators have approved a BRL200m promissory note issue from CTEEP, the power transmission company says. The 180-day notes pay 106.5% of DI. Proceeds will be used to reinforce the company’s balance sheet. Itau is managing the sale, rated F1+ on a national scale. CTEEP is 37.4% owned by Colombia’s ISA.

Brazil low income housing specialist MRV placed 70% of the shares it issued in last month’s BRL722m follow-on in foreign hands, according to the company’s final prospectus. The figure is flat to slightly above the typical breakdown for IPOs and follow-ons for Brazilian companies. Some 265 foreign accounts scooped up 20.6m of the 29.5m units offered. In Brazil, the bulk of the local offering was placed with 206 investment funds, 42 investment pools and 36 pension funds, while 1,310 retail investors bought up 1.6m shares, or 5.4% of the issue. The offering, priced on June 23, consisted of 24.3m primary shares and 5.2m secondary units, all offered at BRL24.50 per share. Underwriters exercised their 15% greenshoe option of 3.37m shares in a trade which closed on July 8. UBS Pactual, Credit Suisse and Santander led the deal.