Category: Brazil

Luiz Cezar Fernandes, co-founder of Banco Pactual and Banco Garantia, says he has clinched a deal to acquire the Brazilian operations of Dresdner Kleinwort from Commerzbank for roughly BRL100m. “This bank here is very clean, which is why I’m buying it,” Fernandes tells LatinFinance, hours before a deal was expected to be signed Wednesday. “The market will need brains, and ones that are not tied up in dealing with skeletons in their closet,” he adds. Fernandes and Eugenio Holanda are paying for the deal in cash, and plan to build a new Brazil-focused investment bank called MTT Group. MTT will have a full banking license and look to take on the Brazil-based investment-banking competition, much of which Fernandes – who runs a sheep farm – describes as being crippled by crisis-related losses. The main challenge, says Fernandes, is knowing what clients need, since global markets have not yet found their footing. Restructuring, M&A, ECM and trading are among the areas the new shop will cover. “Wherever the market needs us, we’ll be there,” says Fernandes. Holanda was formerly with Rio-based real estate securitization shop Tetto Habitacao. Dresdner Kleinwort is the investment banking arm of Dresdner Bank, which was acquired last year by Commerzbank. The latter was expected to confirm the sale of the Brazil unit late Wednesday.

Goldman Sachs and Merrill Lynch see the Brazilian central bank shaving the Selic by 100bp in the March 11 meeting, bringing the rate to 11.75%. However, Goldman says it does not rule out the possibility of the bank making a cut of only 75bp, as the outlook for economic activity in Brazil has improved since January. By mid-year, Goldman and Morgan Stanley see the Selic shrinking to 9.75%, and Merrill says it should drop to 10.25%.

Maritima Seguros is seeking to sell a minority stake to a foreign buyer, in order to capitalize on the growth it sees in the Brazilian insurance sector. “The Brazilian market is going to have great growth in the next few years. We are changing our strategy to look for capital from a minority partnership to take advantage of the new growth phase,” financial director Milton Bellizia tells LatinFinance. The official says the insurance sector could go from a size of 3.4% of GDP to perhaps 6.0% in the next five years. A foreign partner would bring both capital and know-how to help the Brazilian insurer offer new and more sophisticated products that a maturing economy can support, Bellizia says. It is considering selling a roughly 40% stake, which might bring in about BRL500m. Bellizia declines to discuss potential buyers, but notes interest from the US, Europe and Asia. JPMorgan has been hired to advise.

Brazilian banker Luiz Cezar Fernandes says he is indeed in talks to acquire Dresdner’s LatAm investment bank from Commerzbank. While declining to provide further details, he tells LatinFinance reports citing his discussions and the potential price tag of $90m-$100m for the unit are correct. Fernandes, which co-founded Garantia and Pactual, which were sold to Credit Suisse and UBS respectively, is among Brazil’s legendary bankers, but today spends most of his time on a farm in the north of Brazil where, among other things, he raises sheep.

Brazilian meatpacker Independencia has temporarily suspended operations, while Moody’s cut it to B3 from B2. It is temporarily halting slaughtering of cattle at all of its 14 Brazil units, according to local press reports, due to cashflow problems, and will resume as soon as possible. Moody’s action follows the termination of a tender offer for its 2015 and 2017 last week, the agency says, noting that failure to reduce debt will mean sustained leverage levels above 6.0x. It remains under review for further downgrade. Fellow producer Arantes filed for bankruptcy protection in January, and investors say Independencia is also a candidate to seek protection. S&P placed Independencia’s B rating on credit watch negative.

Gerdau is in jeopardy of losing investment-grade status, as S&P has put the Brazilian steelmaker’s BBB minus rating on credit watch negative. The move “reflects the significant deterioration in Gerdau’s profitability and cash generation due to the adverse economic conditions, especially in North America and Brazil’s export markets,” the agency says. The company will be challenged to delever amid the economic downturn that S&P expects to continue through 2009. The agency expects to resolve the credit watch listing in the next couple of months, once the steelmaker’s plans to offset weaker markets become clearer.