Category: Brazil

BicBanco is preparing to launch a program to buy back as much as 10% of its float over the next year. The board of the Brazilian mid-sized bank has approved the repurchase of up to 7.6m shares, following the conclusion of a buyback launched in December where it bought 8.5m shares. BicBanco shares closed Friday at BRL3.50.

Following two days of roadshows in Brazil at the end of last week, Redecard and its bankers at Itau BBA and Citi arrive this week in New York and London to start US and Europe roadshows. Two separate teams are conducting the simultaneous presentations, says a banker involved. Pricing for the follow-on, which targets a BRL1.89bn raise plus a greenshoe, is set for March 24. Redecard is looking to sell the shares at BRL23, but sales representatives at shops away from the transactions say investors are likely to push for a substantial discount, given the relatively anomalous timing and use of proceeds. The sale is being driven by Citi’s need to divest holdings. The US bank, which holds 17% in the company, is hoping to sell as much as 70% of its stake. 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. It will likely announce a decision to accumulate this majority ownership just ahead of pricing, says a person on the deal. Bradesco BBI notes that there is a strong bid to borrow Redecard shares in the run up to the offering, which indicates investors are seeking to go short, though there was very limited supply for this purpose.

Despite pressure on Brazil and real estate generally, Gafisa’s top executives say the company does not face dire cash needs, and could access large pools of cash managed by financial investors if it needed to raise equity. “If we bring [our investors] good opportunities, there’s definitely money there,” Duilio Carciolari, Gafisa’s CFO, tells LatinFinance. Carciolari and CEO Wilson Amaral say Gafisa received support from investors at a recent board meeting. “Investors that manage $2bn-$3bn [worth of funds] are willing to invest with us,” notes Carciolari. Representatives of Chicago-based Equity International (EI), a global real estate focused fund, and New York-based Norte-Sur Partners are on the company’s board. The former has ties to large global institutional investors, many of which invest in EI and its sister companies held by investor Sam Zell’s Equity Group. EI is Gafisa’s largest shareholder with 18.7%, according to Economatica. Morgan Stanley, Marsico Capital Management and Fidelity own an additional 12.3%, 10.2% and 3.9%, respectively. On the debt side, Gafisa is not planning any new issuance, though it is considering deleveraging by divesting a portfolio of receivables worth BRL300m.

The Copom board decided unanimously to cut the Selic rate by 150bp to 11.25% and says it will keep an eye on inflation. Analysts had expected at least a 100bp easing in Brazil, with some shops predicting as much as 200bp following this week’s poor growth numbers. The trend for further reductions remains intact. Bulltick expects another 100bp cut in April, while Barclays forecasts Brazil rates hitting 9.5% or lower by June.

CSN is not studying any significant capital raises at the moment, Otavio de Garcia Lazcano, CFO, tells LatinFinance. Vague rumors have recently surfaced in the loan market that the Brazilian steelmaker might be sounding out pricing on a trade-related financing of at least $100m in size. But Lazcano stresses his company is flush, having just sold a stake in iron ore complex Namisa, which left it with a $5bn cash position and zero net debt. “There is no rush to go out to the market,” says Lazcano, noting that pricing is not attractive. “Why would I go out now to pay an elevated rate?” he adds. High grade LatAm names have seen a significant increase in margins. The benchmark is Bimbo’s $1.7bn 2-tranche M&A facility, which pays 275bp for 3 years and 325bp on a 5-year. Lazcano notes that he would only consider a deal if it were a great opportunity at very attractive levels, which he concedes is unlikely at this point. The company has worked on renewing working capital lines and other short-dated and small day-to-day financings.

Acucar Guarani has raised BRL238.8m through a private share placement. The Brazilian sugar producer issued 119.4m shares at BRL2.00 each to existing holders in an offer closed March 5. The controlling shareholder, French farming group Tereos, exercised its full rights and now holds 69.3%, with 27.6% in free float. Proceeds will be used to reinforce the capital structure. UBS Pactual managed the transaction. Guarani shares closed Wednesday on the Bovespa at BRL2.00.

Eike Batista, the Brazilian natural resources entrepreneur, reportedly has plans to raise a new equity fund targeting LatAm infrastructure. Local press reports suggest the fund would aim to raise as much as $10bn to invest in infrastructure, especially those tied to energy exports. Chile, Colombia and Brazil are among the targeted countries, Batista told local press. A spokeswoman for Batista declines to comment, or confirm details. The executive apparently made the remarks on the sidelines of an event in Rio Tuesday evening. Batista’s holdco EBX has controlling stakes in numerous sizable infrastructure and resources companies, many of them still in greenfield mode. OGX, the startup oil explorer acquired large exploration blocks off the Brazilian coast over a year ago. MPX produces power, LLX is a logistics company servicing, among others, MMX, an iron ore mining company. MPX, MMX and OGX are all listed on the Bovespa.

Brazilian industrial group Votorantim is not considering a dollar bond in the immediate future, a company spokesman tells LatinFinance. The shop had recently been heard sounding investors for a possible benchmark-sized international bond through the Votorantim Participacoes holdco, DCM bankers say. It had considered an offering last year, apparently though JPMorgan and Credit Suisse, when the Votorantim Celulose e Papel unit was preparing to buy a stake in rival Aracuz Celulose. After successful completion of a BRL2.7bn purchase of 28% of Aracruz in January, VCP agreed last week to buy another 28% chunk, raising its total stake to 84%. VCP has also launched a rights offering targeting up to BRL4.2bn. Separately, Brazil bankers await the winner of a Banco do Brasil mandate expected soon for a similar benchmark sized dollar deal, as well the result of an RFP from utility Eletrobras. The failure of Cemex to place a deal, as well as a lukewarm reception to Digicel, underscore the difficulties faced by LatAm issuers in a highly volatile bond market.

Brazilian homebuilder Gafisa is trying to put together a sale of receivables worth BRL300m, Duilio Carciolari, CFO, tells LatinFinance. The purpose of the deal would be to deleverage and free up room for capital with a more practical use. “We don’t want to have cash tied up in receivables,” explains Wilson Amaral, Gafisa’s CEO. Ideally, Gafisa would like to eventually move the entire portfolio off balance sheet, but it may have to keep it on the books for a while, even after a contract to sell receivables is signed. Target buyers include the Brazilian banks that play in real estate credit – Bradesco, Itau Unibanco, Santander and HSBC – says Carciolari. State-owned Caixa Economica Federal and Banco do Brasil are likely to avoid delving into that product for the time being, say analysts. Receivables in question are installment payments for units that have already been built and partially sold. They earn some 15% over the IGP inflation index, says Carciolari. As for new debt, Gafisa says it is not considering accessing any sizable long term funds. Private sector bank financing is too expensive for the builder at the moment, says Amaral. Real estate borrowers face annual rates at 140%-150% of the CDI, which adds up to roughly 16% a year, he adds. Gafisa finances some 80% of new construction with funds from buyers’ savings accounts in the case of middle and upper-income homeowners, and from the state’s FGTS fund for low-income housing. For savings accounts, funding is at TR plus 9%-12%, while for FGTS, the price is TR plus 6%-9%.

Analysts expect Brazil’s Copom to cut the Selic rate by at least 100bp today, while some say easing could exceed 150bp after this week’s anemic growth numbers. “Despite the slew of unfavorable activity data since last week, we believe that it is more sensible for Copom to ease at the pace of 100bp,” says Goldman Sachs. “This notwithstanding, we do not rule out a slightly larger cut of 150bp,” it adds. However, others say it could loosen even further. “Copom will cut 150bp [Wednesday], with the possibility of more,” says Bulltick. “The DI curve is pricing in 125bp-150bp while consensus estimates are for 100bp,” it adds. “The very poor GDP data support a more aggressive stance,” chimes in Barclays. “We still expect a 150bp cut and believe the chances of 100bp have diminished significantly . . . In fact, we believe the alternative has now become a 200bp cut, but still think 150bp is more likely,” it adds. According to Bulltick, Brazil’s equity market will not react immediately to acceleration in monetary easing. “Risk aversion remains very high which together with uncertainties over the macro scenario for 2009 and 2010 leads investors to remain in the sidelines,” says Bulltick. The shop forecasts the Selic rate will hit 10.50% per year or slightly lower at the end of the first half, from 12.75% Tuesday. Barclays sees it even lower. “Risks to our 9.5% Selic forecast for the end of the easing cycle (in June) remain skewed toward even lower rates,” says the shop.