Category: Brazil

Brazil’s Cia Paulista de Trens Metropolitanos (CPTM) is out with a concession for the construction and operation of an express train line between the international airport in Guarulhos to downtown Sao Paulo. This line will be known as Linha 14. It is also offering a concession for the construction of a second line, from Bras station in Sao Paulo to nearby Guarulhos city. The total investment expected for both lines is BRL2.4bn, with BRL1.4bn for the airport line and BRL120m for the second line, known as Linha 13, from the private sector. The government of Sao Paulo state will invest BRL826m on Linha 13. Bids must be submitted by July 22.

Brazilian regulators have approved the issue of BRL245m in 1-year promissory notes from electricity distributor Colece. The subsidiary of Spain’s Endesa expects to pay interest of DI plus 1.6%, and will use proceeds to repay a promissory note. Itau is managing the sale, rated A1 on a national scale.

In what is starting to look like a fevered rush to Brazilian equity markets, 2 more companies have expressed their intention to raise equity capital. Gafisa, a residential homebuilder, says it will very soon file a BRL600m-BRL700m offer, including Bovespa-listed shares and ADRs. JPMorgan and Itau BBA have been mandated to lead. Gafisa stock dropped 6.7% to BRL17.0 Tuesday, much steeper than the 0.9% retracement in the Bovespa. And Hypermarcas, a consumer products retailer, also filed a statement in response to a news report saying it had engaged banks to advise on an equity offering. The company went public in April 2008 at BRL17.00 via Merrill Lynch and Citi. It closed Tuesday at BRL21.05, down 6.4% on the supply news. Other equity hopefuls include Natura, MRV and VisaNet and bankers are gearing up for a second half revival in Brazilian equity. “Many of the companies that did IPOs have used up the cash and need to come back to market,” says Itau BBA executive VP Jean-Marc Etlin on the sidelines of a conference in New York earlier this month. “What’s been surprising is how quickly the market tone has changed,” says a Sao Paulo-based head of investment banking, noting that most of the deals that have been announced have been waiting for months to launch. Investors say there is appetite for substantial issuance from robust names. “[Companies can issue,] as long as issuers have the right pricing in mind and it’s the right story,” says Will Landers, portfolio manager at BlackRock, which manages $5bn in LatAm equity. This year has seen meager equity issuance in LatAm: $1.15bn through May 20 versus $7.24bn in the corresponding period of 2008, according to Dealogic. Brazil central bank president Henrique Meirelles warned in a speech yesterday that foreigners run the risk of displaying excessive euphoria in their belief Brazil will sail through the crisis unscathed. Increasing investment and potential for new equity issuance is a plus, but overconfidence is always a danger,

Michelin’s LatAm head and the chairman of German steelmaker ThyssenKrupp’s Brazilian unit CSA were on board the Air France flight that disappeared over the Atlantic, according to wire reports. Erich Heine, chairman of Companhia Siderurgica do Atlantico and a member of ThyssenKrupp Steel’s executive board, was among the 228 people on the Air France AF447 flight, says Reuters. Michelin’s South America president Luiz Roberto Anastacio and regional IT director Antonio Gueiros were also on the flight, according to AFP. The Air France plane en route from Rio de Janeiro to Paris disappeared off the radar and was presumed to have crashed Monday after hitting stormy weather. Statements from the operator and the French government suggest that survivors will not be found. There were 58 Brazilians onboard.

HSBC has lowered its forecast for 2009 GDP growth in Brazil to a 0.3% contraction from 0.1% growth, citing its expectation of lower levels of gross fixed investment and a slight drop in household consumption. The shop cut its outlook for gross fixed investment to an 8.7% contraction from a 6.0% reduction. It also cut household consumption to growth of 0.7% from 0.9%. For 2010, however, HSBC does the opposite. It now forecasts the economy will grow by 4.1%, an increase over its previous estimate of 2.6%.The shop also hikes its forecast for the 2009 trade balance to a $23.5bn surplus from $20.0bn, and improves its current account deficit forecast to $15.5bn from $17.9bn.

Brazil’s BNDES is meeting investors in New York this week, after starting a “non-deal” roadshow in London Monday. Investors expect a transaction very soon, perhaps a sizeable 10-year, from the Brazilian government-backed development bank. HSBC and Goldman Sachs are managing the tour. BNDES has been one of the most anticipated issuers this year as the market has craved blue-chip quasi-sovereign names to help set benchmarks and pave the way for more corporates. Bankers away from the deal expect a yield of under 7%, given that the existing 6.369% of 2018s are trading around par, after being up at 101 recently. The bank returned to the international bond markets last year after a 7-year hiatus. It wants to be a more regular issuer as its lending has greatly increased during the credit crisis. In May 2008, the BBB minus rated borrower sold $1bn in 6.369% 2018 bonds through Citi and Morgan Stanley. Given the positive tone in EM debt markets generally, substantial LatAm issuance should not be ruled out for this week, with large Brazilian names like Petrobras looking most likely.

Brazilian midcap bank Cruzeiro do Sul is hoping to price a new dollar bond in the next 2 weeks. The bank has issued a prospectus for a new 2-year note with indicative pricing at 9.75%. BCP Securities is sole lead arranger for the deal, which is targeting upwards of $50m in volume. The bank was downgraded in December to Ba2 by Moody’s, which has a negative outlook on the credit. A banker on the deal tells LatinFinance the offer will be shopped largely to private banks. “[Midcap banks] are being told that there is a lot of demand for Brazilian paper from private wealth managers,” says Moody’s bank analyst Ceres Lisboa. He notes that many Brazilian mid-market banks are eager to take advantage of any potential issuance window that may be opening. But it remains to be seen whether an institution like Cruzeiro will be able to price below 10% given its rating and still constrained funding options in the local and cross border markets. In July 2008, Cruzeiro pulled a bond discussed in the $100m size area with a 3-year tenor, also via BCP. In April 2008, it issued $110m in 7.38% of 2010 bonds.

US-based Amyris Biotechnologies increased its stake in a Brazilian joint venture called Amyris Cristalsev to 100%, from 70%. It purchased the 30% stake from its former partner Santelisa Vale, the distressed sugar and ethanol producer being sold to France’s Louis Dreyfus, in a deal announced last week. Company officials decline to specify the price paid for the asset. “We want to build a medium-sized operation in Brazil that [crushes] under 5m tons [of sugar cane annually],” says Roel Collier, the company’s Brazil-based IR official. Amyris Brazil, as the company will be called, will seek to acquire targets to help fulfill this goal and has engaged financial advisors to identify opportunities.

The board of Brazil’s Gerdau has agreed to provide collateral backing for a new $150m 6-year loan facility from Bradesco to be raised by its subsidiary Gerdau Acominas. The deal is apparently secured by assets, though the company does not specify what kind of collateral is being used. The new facility is being used to take out shorter term and maturing debt, a Gerdau official tells LatinFinance, declining to elaborate. A Brazilian syndications official away from the deal estimates pricing on such a facility could reach up to 500bp over Libor given the tenor, but notes that terms and conditions are unknown. Gerdau is in the midst of renegotiating covenants on a series of syndicated facilities raised with international banks. The company is seeking to increase the gross debt to Ebitda ratio cap to 5x from 4x as the steel sector enters a slump and the company’s M&A debt begins to weigh on credit metrics.

Brazilian meatpacker Marfrig has raised a BRL250m 2-year loan through Banco do Brasil. The facility has a 1-year grace period and pays a fixed annual rate of 11.25%, according to a company official. It is backed by export credit notes and designed to improved diversification of Marfrig’s funding sources, according to a statement filed with CVM. The general strategy involves tapping funds in the currencies of the countries where Marfrig does business, says the statement. Marfrig exports to most companies in the Americas, East Asia and Europe.