Category: Brazil

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%.

Brazilian water utility Sabesp is preparing to place up to BRL600m in 2014 debentures, likely in June, according to a banker managing the transaction. Banco do Brasil, Caixa Economica Federal and HSBC are coordinating the sale. Brazilian utilities stand to be important players in reopening the domestic bond market, with Energias do Brasil is expected to sell BRL230m of promissory notes in May through HSBC. CPFL Energia has meanwhile wrapped up a BRL471m promissory notes issue, according to an investor relations official, done through 6 subsidiaries. The 1-year notes pay 118% of DI. Funds raised from the operation will be used for the units’ working capital. HSBC coordinated that sale, rated A1 on a national scale.

Barclays has accumulated a 5.37% stake in Itau Unibanco. The UK bank now owns 111.4m shares, which means its stake was worth BRL3.07bn at yesterday’s close. The share purchase, made public through a filing with the CVM, is for investment purposes only and is not part of a broader attempt to affect the existing shareholder structure, say Barclays officials in a letter issued to the regulator.

Moody’s has placed Cemig’s ratings under review for downgrade following the energy company’s announcement that it acquired a 65.86% stake in Terna Participacoes for about BRL3.5bn. Cemig also has said it intends to acquire the remaining shares it has not purchased from minority shareholders. The rating action affects around BRL840m in debt instruments. The review, says Moody’s, will focus on the impact of this acquisition on the company’s credit metrics, liquidity and debt profile while also evaluating the expected growth in internal cash generation of the combined companies with the higher level of debt. Also under evaluation will be Cemig’s ability to finance future capital expenditures and maintain the past level of dividend distributions in tandem with an anticipated more levered capital structure. On December 10, Moody’s gave Cemig an issuer rating of Baa3.

Brazilian credit card services provider Redecard has approved a buyback program of up to 5.5m shares, representing about 1.7% of its outstanding float. The program will be in place until April 23, 2010. Shares of Redecard, which is controlled by Itau Unibanco, closed Monday at BRL29.21. Last month, Citi divested its stake in Redecard, selling 90.3m shares at BRL24.50 each to raise BRL2.28bn in what was the first Brazilian public equity transaction in more than 7 months.

Brazil real estate partnerships are picking up as developers chase opportunities to buy into new projects at what they perceive to be attractive valuations. GoldenTree Insite, a New York-based real estate private equity manager, has just spent BRL100m to acquire 50% of a high-end residential project in the city of Sao Paulo called 106 Serido. GoldenTree bought two 25% stakes from KlabinSegall, a seller who itself is close to being sold, and Construtora Sao Jose, says an executive on the deal. GoldenTree has a number of residential developments in Brazil that span low, middle and high income demographics. Meanwhile, Cyerla has purchased a 50% stake in Goldsztein Participacoes, which has developments in Brazil’s southern states, for an undisclosed amount. The stake was paid for with Cyrela shares.