Category: Brazil

Brazilian wireless operator Vivo has completed its BRL550m promissory notes issue. The 180-day notes pay 115% of the DI rate. Vivo, jointly owned by Portugal Telecom and Spain’s Telefonica, will use proceeds to repay short-term debt. Banco do Brasil and HSBC managed the sale. Vivo sold BRL500m in 1-year notes in July at 106.5% of DI, and this month took out a BRL389m 8-year credit facility through the Banco do Nordeste development bank.

Brazil’s largest bank, state-owned Banco do Brasil (BdB) is heard to be in advanced talks to acquire part of Banco Votorantim. Industry executives away from the situation say BdB has offered to acquire a 49% stake in Voto with a bid heard valuing the entire institution at around $6bn. Bradesco is also rumored to be in the running, seeking to purchase 100% of Voto, but the owning family does not want to cede control. Both BdB and Voto decline to comment on the rumored transaction, which is apparently in advanced stages amid strong momentum in Brazilian financial institution M&A. “We’ve made no decision about that,” says a BdB official, adding that his bank does not even admit that it is in talks. Employees at both banks say no internal announcement has been made. Local newspapers reported Sunday that BdB is close to offering some BRL13bn for Voto. A New York-based financial institutions M&A banker says HSBC may also consider a bid for the Brazilian bank. If BdB does acquire Voto, Bradesco stands to fall even further behind in Brazil. While still a very large and well run bank, Brazil’s largest private sector financial institution by assets and market cap is already being dethroned by a merger between Unibanco and Itau, announced last week. Bradesco issued a statement to the CVM Monday saying it has no comment. Votorantim owns Brazil’s largest auto insurance writer, and engages in local fixed income including short-term lending and securitization. Its investment banking unit includes offices in New York and Sao Paulo. BdB’s investment bank employs around 100 people in Rio and Sao Paulo, and has rep offices in New York and London.

Less than a month after buying Lehman’s Brazil assets, BTG has sold off a portion to Standard Chartered. The deal includes a team of 14 global markets and support staff, as well as physical assets totaling $4.3m, Standard Chartered says. “Things are dynamic here,” says one BTG executive, remarking on the sale. He declines to comment further, but notes BTG kept the assets it needed and divested the rest. BTG, a fund owned by 12 former UBS executives including Andre Esteves, has a non-compete with the Swiss shop. The agreement precludes BTG from engaging in activities including investment banking. For Standard Chartered, the deal fleshes out a somewhat limited Brazil presence. “This acquisition helps advance our strategy in the local market,” Mark Gross, head of strategy for the Americas at Standard Chartered, tells LatinFinance. He adds that the bank aims to continue developing its capability to support Asian, African and Middle Eastern clients doing business with Brazil. The transaction is expected to be completed by the end of this month. Standard Chartered, which has had a presence in Brazil for 35 years, runs a Sao Paulo rep office with 28 staff.

Brazilian ethanol startup Vital Renewable Energy has secured funding from private investors in the US, Europe and the Middle East that it expects will total more than $1bn. US-based Paladin Capital led the consortium of investors, and Vision Brazil Investimentos structured the transaction and also came in as an investor, Vital says. The group also includes Leaf Clean Energy, Petercam Asset Management and PCG Clean Energy & Technology Fund. Vital is in the process of developing ethanol production facilities and an electricity cogeneration plant in Brazil. It will also consider purchases of existing ethanol facilities and investment opportunities in ethanol infrastructure. Vital has already started construction on its first plant in Sao Paulo State, in partnership with sugar and ethanol producer Grupo Farias.

BNDES has approved a BRL1.42bn 8.5-year credit facility for the local unit of Anglo American. Anglo will draw the funds to expand its Barro Alto nickel mine in the state of Goias. The loan will pay a spread over TJLP, a BNDES official tells LatinFinance, declining to specify the exact margin. Anglo plans to spend BRL3.1bn on expanding the mine. Earlier this year, it acquired control of two Brazilian iron ore projects from MMX for BRL5.4bn.

The asset management arms of Brazil’s Bradesco (BRAM) and Japan’s Mitsubishi (MUAM) have raised a BRL370m fund. The so called Saiken Fund is raised among Japanese investors and will invest in Brazilian federal government securities. It will not have any currency protection, and will be benchmarked against the IRF-M, a fixed income index measured by Brazil’s Andima, the financial markets association. BRAM will manage the fund.

Alberto Sansiviero, Santander’s head of Brazil loan syndications based in Sao Paulo, is leaving the firm. His departure is for personal reasons, he tells LatinFinance, adding he will not go to another institution. Two Banco Real bankers who joined Santander as part of the latter’s acquisition of ABN AMRO assets in Brazil will assume his duties. Conrado Lautenberg, will head origination for Brazil, while Ignacio Lorenzo takes syndications. They will lead a group that includes both Santander and Real executives, says Sansiviero.

Brazilian Poultry processor Sadia has been downgraded to B1 from Ba3 by Moody’s, and is also reportedly being sued by a US investor for failing to appropriately disclose troublesome hedging positions. The downgrade “is primarily due to the company’s significant increase in leverage, as measured by total debt to Ebitda from 3.7x at the end of Q208 to 6.7x at the end of Q308, due to the increase by 76%, or BRL3.7bn, in total indebtedness in anticipation of cash outflows to cover derivatives exposure,” the agency says. Though it will be challenged in the near term, Moody’s adds that Sadia could gradually reduce its leverage in 2009-2010 by cutting investment and costs, as well as reducing working capital needs. Cash flow should benefit from depreciation in the BRL versus the dollar and other currencies. Separately, a New York shareholder has sued Sadia alleging it failed to disclose currency derivative contracts used, according to wire reports. The Westchester Putnam Counties Heavy & Highway Laborers Local 60 Benefit Funds claims the derivative contracts violated company policy because they were “far larger than necessary,” say wires.

UBS Pactual has pared down its Brazil investment banking operation to reduce costs. Among the departures are two research analysts who were let go last week, according to an official at the shop. Guilherme Vilazante Castro, responsible for covering small caps and real estate, and Jander Silveira Medeiros, in charge of consumer and retail, were both shown the door. Selective slashing in sales and investment banking at the mid and junior levels is also heard to have taken place. “We lost many people over the past year so instead of laying off, in many cases we’ve decided not to replace the ones who left,” says the executive. There is, however, a difference in caliber between the voluntary departures and the layoffs. UBS Pactual has been the victim of three large scale defections this past year. In the March, investment banking co-head Alexandre Bettamio left for Merrill Lynch taking with him Roderick Greenlees, head of Brazil M&A, director Hans Lin and five others. In May, Andre Esteves, LatAm chairman of UBS and head of fixed income, departed to start a new fund called BTG, taking with him nine senior executives, including New York, London and Zurich-based heads of trading, structured products and DCM staff. Later in June, five wealth management executives at UBS also left the firm, some of which were based in Sao Paulo. UBS is third placed in the region by core investment banking fees, with $105m, or just over 10% of the market, Dealogic data for the year to October 20 shows.

Banco do Brasil’s bid to acquire the state of Sao Paulo’s Nossa Caixa has gained substantial momentum after a decision late Tuesday from Brazil’s National Judicial Council. The council ruled in favor of BdB in a dispute with Bradesco to manage billions of reais worth of judicial escrow deposits in the states of Rio de Janeiro and Minas Gerais. Since the ruling sets a precedent for similar decisions down the road, private sector banks are unlikely to be as drawn to Nossa Caixa, whose estimated BRL15bn in judicial escrow deposits account for a substantial portion of total deposits, according to a Goldman Sachs report. “This decision removes an important roadblock from the acquisition process, since it gives Banco do Brasil confidence that it will actually receive the judicial deposits in Nossa Caixa,” says the shop. In Rio, Bradesco would have managed some BRL1.3bn in escrow deposits, according to the CNJ’s official news site. The move is additionally positive for BdB in that it suggests it will continue to have access to a large and stable source of deposits. For Bradesco, the news is negative, as Nossa Caixa falls further out of its reach, leaving it with even fewer options to acquire a sizable target in the near term. Bradesco stands to lose its position as the country’s leading bank by market cap, assets and deposits through the planned union of Unibanco and Itau, which was announced Monday. And opportunities to buy its way up the scale chain are ever more scarce in Brazil. Bradesco is expected to appeal the judicial decision.