Category: Brazil

Bradespar, the equity arm of Bradesco plans to sell up to BRL800m in local bonds. The company does not disclose additional details of the operation, which remains to be approved by regulators. Bradespar sold BRL610m in 36-month debentures and BRL690m in 180-day promissory notes in January, both paying 125% of DI, a transaction that reopened the Brazilian local credit market.

Brazilian cosmetics firm Natura has tapped 3 banks to lead an equity follow-on. The winning trio is understood to be Itau BBA, UBS Pactual and JPMorgan, say Brazil-based executives. Natura does not disclose a potential value for the offering, documents for which have yet to be filed with the CVM. In May 2004, Natura raised the equivalent of $240m through its IPO of 18.9m shares at BRL36.50, led by UBS, Itau BBA and Banco Pactual, with Merrill Lynch, Banco do Brasil and Unibanco as co-managers. Natura shares closed at BRL25.90 Friday, down 4.8%, leaving the company with a market cap of BRL11.1bn. The company’s main shareholders are two entities controlled by the Seabra and Leal families, which hold 28% and 27% of the company’s shares, respectively. Senior Brazil bankers say a pickup in equity issuance is in the cards for H2 from well-known liquid names, as IPO issuers of the past few years return to the markets to replenish their coffers. VisaNet recently filed to issue a $2.5bn-$4.5bn IPO. The deal is expected in June and could be the largest to date.

Moody’s has placed on review for possible downgrade Brazil-based Lupatech’s Ba3 corporate family ratings and the Ba3 foreign currency rating of the $275m senior unsecured perpetual notes. “The rating action reflects our view that Lupatech has limited ability to reduce leverage over the near term, which takes into consideration the weakened operating margins in the past two quarters and our expectation that margins should remain constrained by high-cost inventories and lower demand for industrial valves and cast parts,” the agency explains. It adds that net debt to Ebitda of 5.4x as of March 31 is excessively high for Lupatech’s rating category. Moody’s expects free cash flow will continue to be constrained by the high fixed expenses related to its excessive leverage, making it less likely that net debt to Ebitda will decline substantially in the near term. Lupatech manufactures equipment for Brazil’s oil and gas industry.

Brazilian utility Light Servicos de Eletricidade has authorized the issuance of BRL250m-BRL300m debentures. The bonds will mature in June 2011 and the company is proposing to pay an annual 133% of DI. Light is offering BRL250m, with the option to add up to BRL50m during bookbuilding. Proceeds will fund early repayment of BRL100m in promissory notes and go towards working capital. Banco Votorantim is managing the sale.

The board of Parana Banco has approved a program to buy back up to 2.75m shares, the bank says. The program will be in place until November 23 and represents about 10% of the Brazilian mid-sized bank’s 27.56m shares outstanding. Parana’s shares closed at BRL6.09 Thursday.

Brazil’s development ministry and the BNDES are planning to establish a national export-import bank to help support domestic exporters, say government officials. Timing for the establishment of the new institution and its precise relationship to existing government entities including the BNDES are still being worked out, says a spokeswoman at the ministry of development, industry and trade. “The idea is to de-bureaucratize the process [for exporters,]” says the spokeswoman. She notes that companies seeking financing support face a labyrinthine procedure that begins with Banco do Brasil and relies on distinct entities providing services like exporter insurance and credit lines. No size for the new bank’s balance sheet has yet been made public, say officials.

Gol is preparing to issue BRL400m in secured domestic bonds. The 2011 bonds to be issued through the low-cost carrier’s VRG unit will include a 6-month grace period and are expected to pay 126.5% of DI. Proceeds will strengthen the Brazilian airline’s cash balance and are set to complement the BRL204m raised through a rights offering to controlling shareholders. Gol is rated BBB on a national scale. Banco do Brasil is managing the sale, which still requires regulatory approval. “The fact that Gol was able to access some financing should be a mild positive to this story, especially when short-term maturities of $456m are taken into consideration. However, because the company remains largely cashflow negative, the short-term outlook remains very difficult,” Barclays says in a report. With leverage approaching 11.5x and no protection to unsecured creditors and real refinancing risk, Barclays adds it sees limited upside on the bonds.

Sao Paulo-based senior investment banker Marcelo Naigeborin has returned to Morgan Stanley, whose Brazil presence he helped construct in the 1990s. He will provide general coverage of Brazilian clients, assisting with, among other things, M&A and reporting to Sao Paulo-based head of LatAm investment banking Charlie Stewart. “We’re constantly trying to identify and attract the best talent that’s out there as we continue to invest in the region,” Stewart tells LatinFinance. He describes the shop’s hiring as opportunistic and says there is no fixed headcount target for the LatAm group. In February, Naigeborin left Itau BBA – where he was an MD in charge of investment banking for various service and industrial sectors in Brazil – amid reshuffling related to the merger with Unibanco. He was previously an MD at Merrill Lynch in Brazil and started his career at Morgan Stanley in 1993. Stewart says he sees M&A in Brazil picking up in the second half. “People are starting to look at M&A as an offense strategy rather than thinking about it as a defensive strategy, like we’ve seen for the past 6 months,” he says. Morgan Stanley dominates M&A volume for the region in the year to May 18, with $9.1bn from 8 deals, or 31% of the market, according to Dealogic. However, it is sixth for M&A revenue, with $8.9m or 5.7% share, and total M&A volume is down more than 50% year-on-year. Morgan Stanley also recently hired Patrick Cassereau from Merrill Lynch to lead fixed income derivatives for Mexico.

Kinea, the Brazil-based hedge fund 80% owned by Itau is readying a push into real estate and private equity. The fund, which has around $400m in assets under management belonging primarily to Brazilian wealthy individuals, private banks and family offices, has sourced BRL50m in seed capital for real estate and hopes to raise up to BRL250m by the end of July, Alfredo Setubal, EVP in charge of Itau’s asset management arms, tells LatinFinance. The fund will invest primarily in residential property, adds the executive. Kinea is also in search of a team of private equity managers to run a fund targeting illiquid investment in Brazilian companies. The fund has in past months posted a prospectus targeting a BRL260m raise, but Setubal says the fund will likely aim for a much larger pool of capital for the strategy. He hopes to have a team of 3-4 private equity executives in place by end-2009.

Texas-based helicopter services provider Bristow has acquired a 42.5% stake in Brazil’s Lider Aviation for $174m. “Brazil represents Bristow’s single best opportunity for growth,” says the buyer. Of the purchase price, Bristow – which focuses on the oil and gas industry – paid Lider $80m in cash and $94m in cash to shareholders. However, it also received $55m for 5 Bristow aircraft it sold to Lider, resulting in a net cash outlay of $119m. Bristow estimates the enterprise value (EV) without earn-out at $400m and says the implied annualized 2009 adjusted Ebitda multiple is 8x. With full earn-out, it calculates the EV at $525m and implied forward Ebitda multiple at 7x. The 42.5% stake includes approximately 20% of voting rights and Bristow will have the right to provide helicopters for 100% of Lider’s helicopter lease requirements, as well as the right to lease to Lider 50% of total medium and large helicopter requirements – that it would otherwise have met through purchase or finance lease – for the next 5 years. Bristow will have minority shareholder rights on changes in bylaws, equity issuance and any merger or spin-off, and certain changes in debt levels. Bristow has right of 1st refusal on any secondary sale of Lider shares, tag along rights in the event that other stockholders sell, and can appoint 1 of 5 board members and 1 senior manager. “Lider provides the most attractive entry point for a significant share of the growing Brazilian oil & gas helicopter services market,” says the buyer. Bristow claims Lider as the leading helicopter and executive aviation services provider in Brazil, with 38% of Petrobras’ business. It notes Brazil’s growing capital commitment to oil and gas development and estimates at least 30 new helicopters will be needed in next 5 years for activity growth and replacement of aging aircraft. JPMorgan advised the deal.