Category: Brazil

Brazilian low income homebuilder MRV will price its follow-on of 22.5m shares today after the close. An additional 7.9m shares could also be issued over the coming days if market conditions permit. On the eve of pricing, MRV executives and their bankers at UBS Pactual, Credit Suisse and Santander were busily wrapping up roadshow presentations in Europe and the US. The deal is the first offering in what will be a busy week for LatAm equity investors. VistaNet is scheduled to price its jumbo IPO on Thursday in a deal that could raise BRL7.75bn-BRL9.70bn. While a flurry of other statements of intentions to issue have been filed with the CVM, it is not a given that other hopefuls like Natura and Hypermarcas will push ahead with their respective offerings. Gafisa has already said it has decided to postpone its planned offering because of the poor performance of its shares following its announcement of plans to issue up to BRL700m. And a bad start to the week on Monday with the Bovespa falling 3.6% doesn’t help, either. MRV shares, however, may be benefitting from a couple weeks of active dialogue with investors. Its shares resisted the broader market’s declines and closed up 0.8% Monday.

Brazilian sugar and ethanol producer Cosan is readying a two-pronged takeout of a BRl.2bn pile of debt it assumed when it purchased competitor Nova America earlier this year. The company has already issued RFPs to banks seeking feedback on an eventual $500m bond and $350m pre-export payment loan, says a finance official at Cosan. No banks have been selected yet, however, he adds, noting the issuer is seeking the longest possible tenor. Pre-export loans today tend to be no longer than 3 years, say syndicators, though very strong banking relationships could potentially yield a 5-year facility. And bonds for high-yield corporates – so far this year few and far between– have not exceeded 7 years. At Ba3, Cosan would be the lowest rated Brazilian to attempt a large tap in 2009. In April Odebrecht (BB/BB+) raised $200m in 2014s at a yield of 10.00%. Cosan’s last bond – a $400m 2017 priced at 7.25% – was printed in January 2007. The debt to be taken out is held almost entirely with Brazilian banks. Itau BBA and Bradesco are among the biggest lenders to Nova America, whose debt obligations have been fully transferred to Cosan. They hold a combined BRL560m in exposure to the company, while Santander, Votorantim and Banco do Brasil also hold significant pieces of more than BRL100m each. Some BRL444m of the total BRL1.2bn matures within the coming year, while another BRL751 is considered longer-term debt, says Cosan’s IR office.

S&P has cut Brazil-based meat processor Minerva to CCC+ (negative) from B amid concerns about refinancing risk. Even considering a possibly stronger market in the next six months and a successful startup of the company’s food services operation, S&P says Minerva cashflows will be poor, leading to limited room for meaningful improvement in the financial profile. “Given more restrictive credit markets, negative free cashflow, and a significant interest burden, refinancing risk has increased considerably,” says S&P. “The company still relies on its approximate $200m in cash on hand, but we believe its flexibility to weather the current environment is weak,” it adds. The firm has had an Ebitda-to-interest ratio lower than 1x since year-end 2008. S&P expects Minerva to report total debt-to-Ebitda and funds from operations-to-total debt ratios of around 6.5x-7.0x and 3%, respectively, by year-end 2009. It assumes Minerva will gradually benefit from its profitable food service business to mitigate still recovering beef operations, and that it will use part of its liquidity to pay down short-term debt, though weak profitability and high leverage should persist throughout this year.

Italy-based Impregilo, which owns half of the Primav Ecorodovias Group in Brazil, says the latter has signed a 30-year management concession contract that it expects will generate some BRL8bn in revenue during the duration of the concession. As part of the contract, signed with the Public Transport Regulatory Agency of the State of Sao Paulo, Ecorodovias will manage the 135km Ayrton Senna/Carvalho Pinto motorway that links Sao Paulo with Taubate. Under the contract, Ecorodovias will pay the conceding authority an overall fee of around BRL600m real and make investments over the concession period for an amount of about BRL900m. These investments will focus on construction of a 7km extension, modernization work and a partial widening of the current road, Impregilo says.

Brazilian energy distribution company CEEE, whose credit metrics are under pressure, is in the local market seeking a BRL130m 6-year securitization. Final pricing for the bookbuilding process is expected next week. The FIDC, backed by future energy distribution contracts, was originally filed with the CVM in September, but has taken until recently to launch, owing to market conditions. A price ceiling has been set at IPCA plus 9.88%, says a company official, adding that the company hopes to tap at a lower cost if possible. The rate was established by adding 300bp to the 2015 NTN-B treasury note, he adds. The issue got a local AA rating from S&P, says the official. A structured finance executive away from the deal says regulated sector companies such as CEEE are able to use their very strong distribution agreements, backed by local law, to access funds, even though credit metrics of the operating company are weak. CEEE Ebitda fell 24% in 2008 from the previous year to BRL59.7m, according to its annual report. The company’s leverage is also substantial. Using short term financial debt plus supplier and long term financial obligations as the numerator, the company’s leverage ratio stood at 6.3x at year-end 2008. Itau BBA is leading the deal with UBS Pactual as co-lead and admin agent.

Following a reversal in regional equity markets, Brazilian homebuilder Gafisa has shelved plans to issue up to BRL700m in new and secondary shares. The company’s stock has slid 11% since it announced plans to raise equity June 2. “We don’t want to issue at these levels,” Gafisa CFO Duilio Calciolari tells LatinFinance. He adds that the deal has not been canceled, but postponed indefinitely. Gafisa would have until the end of July to issue under its current numbers, after which it will have to refile with its latest quarterly results. JPMorgan and Itau BBA were mandated to lead Gafisa’s follow on, which coincides with a surge in equity filings. “It’s too many deals all at the same time,” says a New York-based ECM banker. “People were hoping the stocks would trade better than they have,” he adds. He notes that Gafisa may not be the only issuer getting cold feet. Natura and BRMalls could also be reassessing their follow on plans, both of which were announced on a preliminary basis, adds the banker not involved in either deal. However, the decline in share price in both cases has been relatively minor, supporting the case for issuing. Meanwhile, MRV is slated to price its follow-on June 23, with VisaNet landing a jumbo IPO – up to BRL9.7bn – June 25.

Brazilian meatpacker JBS is denying any wrongdoing in connection with a bribery investigation. This week, prosecutors and police announced an investigation into allegations of bribery at a number of small meatpackers, as well as JBS. The companies are under investigation amid allegations of bribery to obtain favors from public servants in Rondonia, Mato Grosso and six other states. “JBS affirms that it does not have any involvement in crimes associated with this investigation, which originated with the federal agriculture service in the State of Rondonia, or in any other state,” it says.

Sao Paulo gas company Comgas has obtained a BRL664.9m loan from BNDES. The loan will be used to expand and modernize its gas distribution network and for other capital expenditure programs, the company says in a letter to the local securities commission.

Brazil’s Coelce is preparing a BRL245m debenture sale to refinance promissory notes sold in May. The issue will be split into series maturing in 2011 and 2014, and Coelce has not indicated what rate it will pay. The Brazilian electricity distributor will use proceeds for the early repayment of BRL245m in 1-year notes paying DI plus 1.6%. The new transaction is rated AA on a national scale. Coelce is a unit of Spain’s Endesa.

Petrochemicals giant Braskem has raised a BRL250m securitization in Brazil, cracking open a market for structured corporate risk that has been dormant for the better part of a year. The company’s Chemical IV FIDC, which carries a tenor of 18 months, had sought to launch last year, but pricing levels did not appeal to Braskem, which opted to wait, rework, and return to investors in May. A BRL227m senior tranche priced at CDI plus 140bp, says an investor on the transaction, well below the stated maximum of 300bp. Pricing is roughly in line with what some higher-rated 2-year debentures have been coming at, says a structured finance expert eyeing local flow. An BRL18m mezzanine piece came at CDI plus 750bp, top of the targeted range, adds the buysider. Books were heavily oversubscribed as asset managers, hedge funds, and – in the case of the senior AAA tranche – pension funds and insurance companies sought participation, say executives involved in the transaction. The securities are backed by supplier receivables for already delivered goods and services. Banco do Brasil (BdB) distributed the senior portion, while UBS Pactual worked on the junior tranche. BdB also placed in early June a BRL150 million 26-month securitization at CDI plus 230bp for one of its own subsidiaries, Cobra. The deal is backed by service contracts the bank has with the issuer of record Cobra, a wholly owned subsidiary. Investors expressed strong appetite for the AAA deal, says a banker at BdB. He adds that the state-owned bank plans other similar deals in the immediate future.