Category: Brazil

Bank of America-Merrill Lynch has made some revisions to its year-end LatAm FX forecasts. It now estimates that the BRL will close the year at BRL2.05 per dollar. The shop, which last month thought BRL would reach BRL2.10, says Brazil’s macroeconomic fundamentals are stronger than other EM countries, which should favor the currency. It ended at BRL2.25 March 25. The CLP, says BofA-ML, should end at CLP610/USD, stronger than the previous forecast of CLP625. The shop thinks government sales of some $4bn in USD should support CLP, at least in coming months. It ended at CLP576 on March 25. The ARP, which BofA-ML believes could end the year at ARP4.0 per dollar, is likely to continue to weaken throughout the rest of 2009 as a slowing economy and a deteriorating balance of payments weigh. The shop previously thought the currency could end at ARP3.90. It closed at ARP3.69 March 25. The shop sees MXP ending at MXP13.25, Colombia at COP2,650 and the sol at PES3.25. These forecasts are unchanged. They ended March 25 at MXP14.24, COP2,353, and PES3.14.

Brazil’s Camex foreign trade council has authorized a $700m export credit line to Aerolineas Argentinas. The airline plans to use the 12-year facility to buy 20 planes from Brazilian manufacturer Embraer. Funds will be disbursed by state development bank BNDES, pending its approval.

Brazilian president Lula announced a still relatively vague plan Wednesday to build 1m new homes. Without specifying a time frame, he suggested he would like it to happen by 2011. The homes will be built in accordance with the most recent census data, says Lula. Some 400,000 units will be geared toward the country’s lowest earners, while the remainder will be broken up and distributed to earners of 4-10 minimum wages. Developers specializing in low income homebuilding will have access to BRL1bn in low-cost financing from the BNDES. Funding will be priced at TJLP+90bp-130bp, depending on size, plus a 50bp financing fee for larger builders, plus an additional spread related to the credit risk of the borrower. Disbursements will be done through the BNDES’s commercial bank network. The program is good through March 31 2011.

Gafisa is among Brazilian real estate players that has been in talks with the government to help develop measures to foster low income housing. The initiative is a major boon for low-income developers such as Tenda, which was acquired by Gafisa in Q4 2008, as well as competitor MRV. “We’re trying to build a bridge for the government to [support this segment,]” Gafisa CEO Wilson Amaral told LatinFinance prior to Wednesday’s announcement. He notes that during ordinary market circumstances, this may not have been such an urgent priority. But with the economic downturn, it has taken on more importance and companies like Gafisa are seizing the opportunity to lobby for a wholesale push to jumpstart low income housing. “Brazil has only 2% mortgage penetration, compared to around 15% in Mexico and Chile,” says Amaral. Among items being considered are a flat rate payment option, called Price in Brazil, which involves making equal-sized installments on a house, rather than a large down payment followed by declining installments. Government guarantees for payment interruptions due to unemployment would also help keep many homebuyers in the fold, says Amaral. Builders are also asking for direct subsidies on working capital lines to roll out the large number of developments that could result from such a package. For funding from state-owned entities like Caixa Economica Federal and FGTS, lines could price as low as TR plus 3%-4%, says Amaral.

Citi has managed to divest 90.3m shares it owns in Brazilian credit card company Redecard at a minor discount to Tuesday’s closing price of BRL24.90. The shares are being offered at BRL24.50, which represents a 1.6% haircut to the last session’s close, and an even smaller discount to the stock’s average trading price over the past several months. Redecard said in a filing earlier this month it would offer 82m shares held by Citi at BRL23.00. But as the stock traded up, Citi opted to increase its sale to 93m shares. Not including a greenshoe, which is likely to be fully exercised given the book was heard more than 4x oversubscribed, the US bank was set to raise BRL2.28bn, or $1.01bn. Itau Unibanco and Citi are leading the offering. Redecard’s existing shareholders Itau and Unibanco – now part of the same institution – also announced they plan to exercise an option to acquire 24m shares to give them a 50% stake plus one additional share. They will pay the same BRL24.50 for the shares. Investor enthusiasm for the deal far surpassed the expectation of many involved in the deal, which, some weeks back, was characterized by uncertainty and skepticism that investors would be willing to put money to work. “This shows that good companies can raise cash even in today’s equity market,” says one Brazil-based banker of the first public equity deal in more than 7 months.

MRV Engenharia e Partipacoes plans to raise up to BRL200m in promissory notes and debentures, it says. The Brazilian real estate company is preparing BRL100m in 90-day promissory notes paying DI plus 3.7% and BRL100m in 2011 bonds paying the same. The company does not provide further information regarding the sale, which must be approved by shareholders April 8. After months of sparse flow, Brazil’s domestic bond market appears to be headed for a resurgence. Telemar started Tuesday a roadshow in support of its BRL3bn in 2011 and 2012 bonds, paying 15bp and 20bp over DI, respectively. The issuer looks to wrap up the sale through Itau and Bradesco by April 15. Also, Tractebel plans to sell up to BRL300m in 360-day promissory notes and BRL600m in 2011 debentures, both at 125% of the DI. The Votorantim Financas unit of Brazil’s Grupo Votorantim, however, has cancelled plans it made late last year to sell BRL500m in local bonds. The firm did not provide a reason.

UBS Pactual has downgraded equity in Brazilian airline Gol to neutral after upgrading it to buy in December. “Not only has the stock significantly underperformed the broader tape since, fourth quarter results and the subsequent capital increase announcement point to poorer that expected prospects for equity holders,” the shop says. Gol’s board has approved a capital increase of BRL204m through the issuance of 26m new shares at BRL7.80 per share. The company’s cash balance dropped to BRL592m, the lowest since Q1 2004, of which BRL177m is restricted. “Unrestricted cash now corresponds to less than one month’s worth of operating costs, which is not ideal considering the seasonal lull that is just around the corner. The cash infusion does underscore the family’s commitment to the business, but it also implies earnings per share dilution that could reach 13%,” the shop says. UBS cut its price target for the stock to BRL9.00 from BRL13.00. On March 23, it closed at BRL7.25.

Brazil’s Redecard is set to price today its BRL1.89bn follow-on offering, after Brazilian, US and European roadshows, and the closing of a reserve period yesterday. The book was oversubscribed as of late Monday, according to an official close to the seller, who downplayed rumors of a discount of up to 20% from the intended price of BRL23. Citi holds 17% in the company and is hoping to sell as much as 70% of its stake to raise badly needed funds. Itau Unibanco, which controls just under 47% of Redecard, has the option to acquire an additional 3.6% stake in the company to take it to 50% plus one share.

Telemar shareholders have approved a plan to issue up to BRL3bn in debentures. The Telemar Norte Leste unit plans to sell 2011 and 2012 notes, paying DI plus 115% and 120%, respectively. Proceeds will repay debt. The Brazilian telecom, operator of the Oi brand, faces bridge maturities from the financing of last year’s acquisition of Brasil Telecom, having borrowed BRL3.6bn in 1-year notes in July and BRL2bn of the same tenor in December. Telemar has also been heard considering a dollar bond in March or April, after a $1.5bn issue of 5 and 10-year bonds was pulled in September.

Gol Linhas Aereas Inteligentes, the Brazilian low-cost airline, has approved BRL203.5m capital increase through issuing 26.1m shares, including 6.6m common units and 19.5m preferred at BRL7.80 each. The level is equivalent to 90.9% of the average closing price of the preferred shares during the last 30 trading sessions, which was BRL8.58, and to 83.2% of the average closing price during the last 60 trading sessions, which was BRL9.37, says Gol.