Category: Brazil

Brascan Residential Properties has approved a stock buyback program of up to 11m shares, representing 10% of the Brazilian developer’s float. It has set aside part of its BRL150m working capital reserves to fund the program, which will last a year. Brascan’s shares closed Thursday at BRL3.75 and the market was shut Friday.

Brazil’s central bank cut the Selic rate by100bp Wednesday, reducing it to 10.25%. The move is in line with market consensus. Looking ahead, expectations vary across shops. RBC expects one last 50bp Selic rate cut in June to 9.75%, while BofA-Merrill Lynch expects another 100bp cut in the June meeting to wrap up the easing cycle with the Selic at 9.25%. Morgan Stanley, meanwhile, estimates the central bank will cut an additional 150bp cut in June, leaving the Selic rate at 8.25%.

The board of Copasa has authorized the Brazilian water utility to obtain a EUR100m loan from German development bank KfW, the company says. The 12-year facility features a 3-year grace period and pays 3.45%. Proceeds will help fund the Minas Gerais state government-owned utility’s project to clean up pollution in the Rio Paraopeba basin.

Brazil’s Eletrobras has named Credit Suisse to manage an upcoming dollar bond issue, Raquel Krauss head of Eletrobras’ Funding Division tells LatinFinance. The announcement had been anticipated since RFPs were due at the beginning of the month. Participating bankers said that the winner need not necessarily be a balance sheet champion, but rather the shop offering to deliver the lowest all-in cost. The government-controlled utility is heard planning a 10-year bond of up to $600m in size, though an issue is not expected soon. Krauss did not comment on timing or size of a bond. The BBB minus issuer’s existing 7.75% of 2015s traded recently at 103.00 to yield 7.17%, according to data from Credit Suisse. Bankers expect a premium of 50bp-100bp on a new bond, noting that the 2015 is an inefficient benchmark, since it is relatively illiquid. Eletrobras approved a BRL30bn investment plan for 2009-2012. Of the total, the company says it already has BRL3.9bn in financing from the BNDES and Brazilian banks, and can use BRL10.9bn from its own resources. So far this year Credit Suisse has had joint books on Digicel’s $335m 2014 with Citi and JPMorgan in March, and on Mexico’s $1.5bn 2014 with Deutsche Bank and HSBC in February. It ranks 10th in the regional DCM league table, according to Dealogic.

Amsterdam-based TNT says it is acquiring a 51% stake in Brazil’s Expresso Aracatuba, a mail and express delivery company, for about $71.5m in cash. TNT says it intends to purchase the remaining stake in Aracatuba in May 2010 for $32.5m. Aracatuba has been a partner of TNT subsidiary, TNT Mercurio, in Brazil’s Central West and North regions since 2001. The deal was privately negotiated. In February, TNT announced the acquisition of Chile’s LIT Cargo for an undisclosed sum.

Distressed real estate developer Klabin Segall is being sold for around BRL112m in equity value to Veremonte Holdings, a real estate company run by Spanish developer Enrique Banuelos, and Agra Empreendimentos, a local developer. Klabin Segall has BRL476.0m in net debt, and its market cap stood at BRL144.5m prior to the deal’s closure late Monday. Veremonte and Agra will form a new holdco owning 57.8% of Klabin Segall’s shares. Both will lend BRL10m each in the short term, while Veremonte will inject BRL100m in equity. Veremonte will control 65% of the target’s new holdco. “Despite the heavy dilution, in our view the deal was probably the best solution for Klabin Segall,” says Itau Securities. It notes an improvement in the capital structure as well as relief in the cash position. The shop says the transaction was also cheap for Agra, especially, and required minimal cash outlay for the developer. JPMorgan advised Klabin Segall on the deal. No other advisors are heard to have been involved on the other side.

S&P has cut the outlook to negative from stable on Brazil’s Perdigao’s BB+ long-term corporate credit rating. “The change in outlook reflects the more challenging operating environment for food companies in general,” says S&P analyst Flavia Bedran. The agency predicts that soft global demand and a decrease in margins in 2009 will lead to weaker cashflow-protection metrics. It had expected Perdigao to cut total debt faster than it will be able to. S&P’s revised projection indicates that the company should report a total debt-to-Ebitda ratio of more than 3x by 2010, higher than its original expectation of 2x by 2010,” says the agency. However, it adds that comfortable liquidity and expected free cashflow generation give Perdigao flexibility to adjust to market conditions. S&P notes that Perdigao is highly exposed to unpredictable events, including trade barriers, outbreaks of animal diseases, volatility of commodities prices affecting raw material costs, and a significant share of low-value-added commodity-like products in its portfolio. “The negative outlook reflects the challenging operating environment for food companies in general, given the considerable decrease in external demand,” says S&P.

RBC Capital expects Brazil’s central bank to deliver a 100bp Selic rate cut to 10.25%, in line with market consensus, as the fallout from the global crisis in Brazil continues to deepen. However, it believes the pace of future rate cuts will be more data dependent. RBC predicts one last 50bp Selic rate cut in June to 9.75%. Bank of America-Merrill Lynch also forecasts a 100bp cut today. “We reaffirm our call of one more cut of 100bp, at the June meeting, culminating the easing cycle with the Selic at 9.25%,” the shop says. Morgan Stanley meanwhile believes there is room for a 150bp easing, citing falling inflation, which is set to drop below the central bank’s 4.5% target around mid-year from a peak of 6.4% in October. In June, Morgan Stanley forecasts that the central bank will drop an additional 150bp cut, leaving the Selic at 8.25%.