Category: Brazil

Brazilian consumer giant Hypermarcas will today price its follow-on of 40.5m, which at Monday’s closing price of BRL23.75 could raise the company BRL962m. Executives close to pricing say the deal appears to be garnering a healthy book, but a true gauge of demand will only come at today’s close, since many investors may wait until the last minute to file their orders. A discount as low as 3% or lower seemed feasible yesterday, they add. The deal involves 10m secondary shares, 20m primary shares, a 4.5m additional optional block, and the underwriters’ greenshoe of 6.0m shares. Citi and Credit Suisse are leading.

Following the departure of Ricardo Lacerda, Citi’s head of Brazil investment banking, three of his deputies Fabio Bicudo, Otavio Guazzelli and Jairo Loureiro, will assume leadership of the Brazil banking business. That three MDs have been elevated to replace one senior banker reflects the fact that below Lacerda there wasn’t one banker in particular that was senior enough to assume the position on his or her own. It is seen by people close to the situation as a temporary solution while a clearer hierarchy is established. The three senior bankers will continue to provide client coverage for all investment banking products, including ECM, DCM and M&A in Brazil. Despite troubles at home in the US, Citi’s Brazil office has remained relatively busy, in particular in ECM. The shop has co-led Vale’s $1bn convertible offering last week, and is among the leads for follow-ons for Light, which priced last night, and Hypermarcas, set to price today. The local Brazil ECM business will continue to be headed by Persio Dangot, while Roberto Serwaczak heads all of equities for Brazil. LatAm ECM is headed by Juan Carlos George, in New York.

Ricardo Lacerda, Citi’s head of Brazil investment banking, is leaving the firm and has no plans to resurface at another sellside firm, say people close to the executive. The move marks a substantial loss for Citi, since Lacerda was the bank’s most senior investment banker based in the region. Lacerda, long rumored to be leaving Citi, apparently has not yet decided what direction he will take after his departure. Starting a new venture that involves investments and asset management in Brazil is among the options he will consider. The timing of the departure is based more on the opportunity to exit provided by a pullback in market activity, says a person close to the move. Lacerda is said to have been planning the change for a while, and believes there are a number of ways to maintain a presence in the market through alternative models to the large investment bank. Rumors in the local market suggest he may seek to craft a new investment role alongside Joao Alves de Queiroz Filho, the chairman of Hypermarcas, known in the market as Junior. Lacerda has had a long and deep business relationship with the executive, having most recently helped take his company public and co-lead its follow-on equity issue, which prices today. But a person close to Lacerda dismisses the rumors, saying that not even the banker himself has a clear idea of what he will do next and that Queiroz has no plans other than to run Hypermarcas. Lacerda has also been offered the chance to pursue a political career, an option he has entertained but is heard to be leaning away from at this stage. Lacerda joined Citi in 2005, when he and group of deputies decamped from Goldman Sachs. He was a key part of the US shop’s regional investment banking effort. He is expected to quit Citi in November and take a 6-month sabbatical.

The IFC is planning to deploy its guarantee product in the Brazilian local market, which remains restricted to high-grade issuers from only a few sectors. “We’re looking at guarantees, either partial credit guarantees on debentures or loans,” Rogerio Pilotto, the IFC’s Sao Paulo business development officer for structured and sub-national finance, tells LatinFinance. The last time it used the product in Brazil was in 2003 for BBA-Creditanstalt, that time offshore. “We’re having very preliminary discussions,” says Pilotto, adding that a deal could happen this year. Multilateral guarantees are provided to issuers that need credit enhancement to access capital markets, particularly when markets are volatile or risk averse. The IFC product has been tweaked to meet Brazilian regulatory requirements. The IFC is also looking at guaranteeing a microfinance facility. Elsewhere in structured finance, the IFC is looking at doing an SME FDIC locally, as well as offering in the Brazil the same risk sharing facilities that it is deploying in Africa. The latter is constrained by the markets environment. “It’s a not a time to expand credit all that much across the region,” says Pilotto.

Brasil Foods, the new name for the merged Perdigao-Sadia, hopes to raise as much as BRL5.28bn through an offering of new primary shares, scheduled to be priced July 21. The company plans to issue 115m ordinary shares, with an additional 17m supplemental units, conditions permitting, according to a prospectus filed with the CVM. Using the July 7 closing price of BRL40.00 per share, the 115m shares could yield BRL4.6bn. Proceeds are largely being used to recapitalize the company and fix up its battered balance sheet, the Sadia part of which was damaged by BRL2.5bn worth of derivatives liabilities in 2008. Some 37% of proceeds will go towards paying down and raising FX export credit lines with commercial banks. UBS Pactual is leading the deal, with Banco do Brasil, JPMorgan and Santander as joint-leads.

Bradespar has completed a sale of BRL800m in domestic bonds, achieving a lower than expected price amid continued contraction in Brazilian local market spreads. The equity arm of Bradesco sold BRL140m in 2010 bonds at 105% of DI and BRL660m in 2011s at 108% of DI. The issuer had been prepared to pay up to 125% of DI, and had earlier expected rates of 112% and 115%. Bradespar was the first Brazilian local issuer this year, paying 125% of DI for BRL610m in 36-month bonds and 110% of DI for BRL690m in 180-day CP. However, increased investor appetite does not seem to have translated so far into longer tenors. Fellow recent issuers Elektro and Tractebel were able to place 2011s, with only Ultrapar going longer than 2 years, getting a 2012 via private placement. Upcoming issuers Coelce and CCR will each shoot for 2014s. Bradesco managed the Bradespar bond, rated AA+ on a national scale. Proceeds will refinance existing debt.

Bank of America-Merrill Lynch’s new balance sheet-equipped banking platform will focus its efforts on local markets, including Mexico, Brazil and Chile, where it has fully staffed offices. Countries like Colombia, Peru and the Caribbean region will also be targeted for corporate banking and the more sophisticated markets and investment banking businesses, Sonia Dula, head of LatAm corporate and investment banking tells LatinFinance. The bank may one day offer local currency loans. “Local currency lending will be a component [of our offering in Brazil] but we are currently focused on global cross-border capabilities,” says Patricia DelGrande, head of corporate banking for the Americas. “Today we would need to start with dollar lending and move into offering local currency lending,” she adds. Local bonds will also continue to be a focus, says James Quigley, president of the LatAm business. “We’re committed to expediting the local capital markets. When we do a [Mexican] peso bond – that’s important to me,” Quigley tells LatinFinance. Indeed, Mexico offers the most succinct picture of what the bank envisions for other local offices, say BofA-ML officials. BofA already had a presence in Mexico, where it did syndicated lending and corporate banking, and Merrill’s local broker accounts for a large portion of equity trading there, says BofA-Merrill. The 2 businesses have been fully merged successfully, the banks claim. In Brazil, an abundance of exporters and commodity companies makes trade-related lending a compelling product too, says DelGrande. “I see opportunity in global trade finance, particularly for Brazilian companies, given their growth profile and the diversification of their exports,” says the banker. Before it announced plans to be folded into BofA, Merrill said it was targeting rising second-tier names for its client roster. That strategy remains intact, claims Quigley, noting BofA-Merrill is mindful of the mid-cap sector’s high growth rates and continues to c

Sistema Educacional Brasileiro (SEB) has acquired Pueri Domus’ schools and editorial units for BRL32.9m in cash and assumed BRL8.6m in debt, representing 6.6x Ebitda, the buyer says. Itau Securities likes the deal, and says an accretive multiple and synergies will result from the union. “This is a very profitable segment with good growth prospects,” say Itau analysts, pointing to roughly 35% Ebitda margins and a still low penetration rate of around 30% among the state of Sao Paulo’s 7.1m private-school students and 5% among the 25m public school students. The shop also believes SEB may make more acquisitions as it still has BRL100m in cash and virtually no competition for K-12 assets.

Shareholders in Brazilian power produce Light are scheduled to sell 26.8m shares July 13. In total, the deal could add up to 34.9m shares, which, at Wednesday’s closing price of BRL27.65, could amount to BRL965m. BNDESPar, the equity investment arm of Brazil’s development bank, is reducing its stake by 13.4m shares to 55.2m, which will be equal to 27.1% of the company, while France’s EDF is divesting its entire 6.6% stake in the company, composed of 13.4m units. BNDESPar could sell an additional hot issue of 2.7m shares, while underwriters will have the option of a greenshoe for 5.4m shares. Citi and Itau BBA are leading the placement.

Analysts expect Moody’s to raise Brazil from Ba1 to investment grade, following a review announced Monday. Goldman Sachs says that the upgrade is “highly likely” and adds that it will be a significant event. Having an investment grade rating by all 3 rating agencies, the shop says, will “open up a broader universe of strictly investment-grade investors, which could be particularly positive for corporate bond issuance.” Bulltick Capital, meanwhile, says the review “will not be an overwhelmingly market-moving event as this move was likely long overdue, expected by the market (and therefore likely priced in), as Moody’s was the only major rating agency with Brazil below investment grade, and many institutional investors such as major insurance companies can invest in a sovereign that has two out of the three investment grade ratings.” S&P and Fitch have a BBB minus rating for Brazil. Moody’s placed Brazil on review for possible upgrade based on the economy’s demonstrated resilience to shocks over the past year.