Category: Brazil

Brazil’s Votorantim Financas is preparing to sell BRL1.05bn in promissory notes, according to a report from S&P assigning a A-1 national scale rating. The 180-day paper will repay an identical issue due in July. The unit of Grupo Votorantim has not indicated the timing of the sale, the managers or what it interest rate it expects to pay.

BofA-Merrill Lynch’s Brazil office has suffered its first voluntary senior investment banking exit of the year, following a slew of high profile departures from the US bank elsewhere in the region. Adriano Borges, an MD who headed banking for real estate, among other sectors, will join the ranks of Itau BBA’s senior coverage bankers that include Andre Kok and Fernando Iunes, say local executives familiar with the move. Borges, who is on gardening leave, will report to Jean-Marc Etlin, head of Itau’s investment banking unit. His precise sector responsibilities have yet to be worked out, says a local banker familiar with the move. The departure makes a significant dent in the foundations of BofA-Merrill’s Brazil franchise, which – unlike New York, Mexico City and Buenos Aires – has thus far been unscathed by the ongoing senior talent drain. Borges’ move suggests turmoil related to TARP and Bank of America’s apparent void when it comes to LatAm strategy have inhibited the Brazil business. Bankers say that BofA-Merrill is struggling to win mandates across the board. This is particularly apparent in the highly competitive Brazilian equity market, which is starting to revive. Several large IPOs have been awarded already and more will likely be mandated, say local bankers. But BofA-Merrill has yet to make an appearance as a lead on any, despite a highly paid roster of seasoned ECM officials. Merrill hired Borges from Credit Suisse – where he led the Brazil real estate investment banking business – in April 2008. Merrill was the most aggressive hirer in Brazil investment banking last year, betting heavily on sustained strength in the Brazilian fee pool, which was drained by a plunge in equity volume. Sao Paulo-based recruiters expect more staff exits in the short term.

Brazil’s Banco Cruzeiro do Sul has sold $60m in bonds, in the first Brazilian midcap cross-border offering in nearly a year. The 2011 notes priced at 98.666 with a 9.000% coupon, to yield 9.750%. The Ba2 transaction via BCP was offered mostly to private banks, according to a banker on the sale. Brazil’s medium-sized banks were active issuers in the first half of 2008, with Parana Banco selling $35m in 2010s at the end of July. Cruzeiro pulled a bond discussed in the $100m size area with a 3-year tenor in July 2008, also through BCP. In April 2008, Cruzeiro successfully issued $110m in 7.38% of 2010 bonds through BCP and UBS.

Brazilian shopping-mall company Multiplan has approved the raise BRL100m in 2011 bond, it says, and has completed the bookbuilding process. The notes, the developer’s first local bond offer, pays 117% of DI. Proceeds are destined for general corporate purposes. BBI and UBS are managing the transaction, rated AA minus on a national scale.

Mexico’s central bank reportedly intends to buy IMF bonds, following similar announcements by China, India and Brazil. While some may question this use of dwindling reserves at a time when the economy is under such severe pressure, analysts say it is a good idea. Alfredo Thorne, MD of economic and policy research at JPMorgan, says that doing so would allow the central bank to reduce exposure to the US dollar in favor of more stable IMF special drawing rights. He adds that he has heard Mexico might purchase $25bn in the bonds, versus Brazil’s $10bn bid. The country’s reserves total $75bn, versus Brazil’s roughly $200bn. Walter Molano, an analyst with BCP, says that by acquiring IMF bonds, Mexico – as well as the other countries interested in doing the same – can have more say in how the fund operates.

Construction delays on a drill ship in Asia are forcing Brazil’s Grupo Schahin to renegotiate an $800m 10-year Petrobras vessel project loan. This may impact Schahin’s ability to raise funds for a new set of oil platforms, say bankers. The loan being reworked was launched mid-2007 at 237.5bp over Libor during the 3-year construction period and 162.5bp-200.0bp in the 7-year post construction period. New pricing and final maturity are still being worked out, say people close to the transaction. An executive close to the sponsor says there is nothing alarming about the delays at Yantai Raffles shipyard, which are always expected with large projects, and that Petrobras is aware of the potential delay to construction of the rig, called Black Gold. But bankers watching the deal worry that postponement will cost the sponsor, as additional expenses eat into its ability to extend a larger equity contribution for an upcoming deal. Schahin is planning an estimated $1.3bn 10-year project loan for 2 new twin platforms, to be called Black Diamond. A Schahin executive dismisses concerns as unfounded speculation and sees no reason to be concerned about either transaction. “The shipyard is always a critical component of these deals,” says a syndicator, echoing remarks by other project bankers. Bankers allege that China-based Yantai Raffles has little experience in building this specific type of Petrobras vessel. Appetite for fresh Schahin risk will be gauged by the performance of Odebrecht’s syndication for a nearly identical project – twin platforms with a debt component of $1.3bn. Odebrecht’s facility offers 340bp in year one and steps up to 415bp over Libor. A Schahin deal would likely have to start at around 400bp, says a banker with knowledge of the credit. Schahin hopes it can put together long term financing for Black Diamond by year-end. Bankers on the deal are skeptical that such a timeline is achievable. Standard Chartered, Unicredit, WestLB and Mizuho signed agreements wi

Brazilian companies are in a class of their own when it comes to governance, while Mexican entities are falling behind. As corporate standards get tougher, Brazilian power generator and distributor CPFL distinguishes itself with a firm focus on sustainability, according to the third annual LatinFinance ranking of the corporate governance of the 50 largest public LatAm non-bank corporations, conducted in association with Management & Excellence (M&E). Brazil is helped by being the only LatAm country with a corporate sustainability index, the ISE, launched in 2005 and used as a reference for social responsibility related investments. Companies are required to follow a series of checkpoints in sustainability to be included in the ISE. “The significant growth in the quantity of IPOs in the Sao Paulo Stock Exchange, with a large portion of those following the New Market, enforces tight standards in governance and transparency,” says M&E managing director William Cox. For the second year running, CPFL tops the corporate governance charts. “CPFL found that including sustainability in its management practices was key for its success in the long term and it took the leading edge on that,” says Cox. “They’ve demonstrated good performance in three areas, with simple and efficient projects, with a good communication level of their reports through their website. That makes it easier to understand what is going on inside the company,” Cox adds. In general, Brazil is doing better than the rest of the region. “Laws, stock exchange guidelines and public awareness of sustainability are at a different levels in Brazil than, for example, in Mexico,” says Cox.

Brazilian electric transmitter CTEEP plans to sell BRL200m in 180-day promissory notes. It does not indicate additional details of the operation. The unit of Colombia’s ISA is rated AA on a national scale. ISA told LatinFinance in April it is considering dollar bonds for CTEEP along with an issue of its own later this year.

Canadian mining exploration company Yamana Gold has agreed to sell its producing mines in Honduras and Brazil to Aura Minerals for $200m, of which $160m is in cash and $40m in Aura common shares at CAD0.40 each. The sale of the Honduras mine, San Andres, is expected to close July 23 and the Brazil mines, Sao Francisco and Sao Vicente, are expected to close by the end of the year. Yamana will retain a contingent cashflow-based royalty on the mines that will provide up to $40m in additional payments to Yamana, which it says it expects to receive beginning as early as 2012. National Bank Financial is acting as the financial advisor to Yamana and Cassels Brock & Blackwell is legal advisor. Aura Minerals’ financial advisor is Genuity Capital Markets and its legal counsel is DuMoulin Black.

Brazilian debt was most frequently traded in Q1, according to EMTA, with $175bn in turnover. This compares with $238bn in Q1 2008 (a 27% decline) and $164bn in Q4 2008 (a 7% increase). “Brazil’s 2040 bond remained the most frequently traded industry instrument, accounting for $12bn of survey turnover, although volume was down 58% and 8%, respectively, from the same quarter in 2008 and the previous quarter,” says EMTA. Brazilian volumes accounted for 19% of total survey trading, slightly below its share for the 5 previous quarters. Turkish assets were second most frequently traded, at $140bn, and China third with $92bn. Other frequently traded instruments were securities from Mexico ($45bn). EMTA’s survey includes trading volumes in debt instruments from 90+ EM countries. It includes data from 46 EM debt traders and investors, including investment and commercial banks, asset managers and hedge funds.