Category: Brazil

Clean Energy Brazil, an investment company focused on sugar cane an ethanol in Brazil has tapped Merrill Lynch to advise it on fundraising and strategic growth decisions, it says. The bank will help Clean Energy decide which acquisitions and greenfield projects to pursue, as well as evaluate fundraising options, CEO and joint owner Marcelo Junqueira tells LatinFinance. “The idea was to use a bank with the profile to target potential investors with an appetite for sugar and ethanol,” he says, noting that it picked Merrill before its sale to Bank of America and expects the long-term partnership to be fruitful. He declines to indicate what the company’s capital targets might be. “Raising capital is not a short-term activity. We’ll develop a plan to come to the market when the market recovers,” he explains.

Brazilian telecom GVT has appointed Rodrigo Ciparrone CFO and head of investor relations. He was previously finance director and controller of ZF do Brasil, a German manufacturer of auto parts, and before that, CFO at mobile parts supplier OSM Group in Sweden. He has also worked for Ericsson and Sony Ericsson.

RBS, which acquired the US-based LatAm business of ABN AMRO, is heard building up a sales and trading effort in Brazil, seeded with 3 recent Deutsche Bank hires. The group, to be eventually based in Sao Paulo, is heard headed by New York-based Pinar Gurler, an MD in charge of distribution and derivatives solutions for LatAm, formerly at ABN. She has hired Ricardo Bicudo, a senior Deutsche Bank fixed income executive who will be head of Brazil sales at RBS. He is joined by two other Deutsche fixed income staff – Cassio Silbermann and Carlos Simonetti – who also recently quit the firm. Gurler is said by headhunters to be looking to poach more talent in Brazil and RBS appears to have long term plans for Brazil – it is applying for a bank license with central bank. Deutsche, which also lost several senior Brazil people to Itau in recent months, is heard preparing to replace Bicudo, who worked on local market securitization, among other things. Deutsche Brazil officials were not available for comment.

Brazilian president Lula says Brazil will not overspend just because it has newfound oil wealth, as its responsibility has increased after the latest petroleum windfall. “We need investors,” Lula says at an Americas Society event in New York this week. He adds that he expects more than $2trn to be invested in the country by 2012, including $280bn on physical infrastructure. Lula also says Brazil’s strong domestic market will withstand external shocks, as it can divert exports from the US to destinations like China, and other LatAm nations.

Fitch has raised the outlook on Brazil’s Sabesp’ BB rating to positive from stable, including $140m in notes and BRL900m in debentures. “The positive outlook reflects Sabesp’s improvements in its credit protection measures and the expectation of a more stable regulatory environment in the coming years with the consolidation of the requests introduced by the new sector legislation,” says the agency. Upgrade would depend on Sabesp maintaining its credit protection at levels compatible with a better risk classification, notwithstanding a more aggressive investment program beginning in 2008, says Fitch. It is also monitoring advances in signing service contracts with important municipalities and greater clarity regarding future rate adjustments. “Fitch also would like to see the company resolve its probable need for increased resources, especially in 2009, and the definition of the possible acquisition of EMAE – Empresa Metropolitana de Aguas e Energia – including price and payment conditions, if it is concluded,” it adds. Fitch also notes an increase in investment and need to roll over part of the maturities next year. Some BRL500m may be needed from capital markets next year. “Debt in foreign currency totaled BRL1.4bn and the company does not have protection against this exposure,” adds Fitch.

Moody’s has downgraded Cosan’s global credit rating to Ba3 from Ba2 with a negative outlook. The Brazilian sugar and ethanol producer had been under review since an April announcement that it was to acquire ExxonMobil’s Esso Brazilian distribution assets. “The rating action reflects Cosan’s higher leverage, weaker operating margins and negative free cash flow, which resulted from a combination of adverse market conditions over the past quarters and the expected use of liquidity for the Esso acquisition, together with an ambitious capital expenditure program for the next few years,” the agency says. It sees poor cashflow during the next two years owed to high leverage and an ambitious growth strategy, on top of possible difficulties integrating the Esso assets. While Cosan’s capex plans and successful integration of the Esso purchase could improve the credit profile in the long-term, Moody’s finds it should be dependant on external debt or equity financing in the near to medium-term. Cosan announced Monday plans for a BRL880m share sale to existing investors and up to $800m in credit facilities to help fund expansion and the Esso transaction.

GoldenTree InSite Partners, a New York-based real estate investment fund affiliated with the eponymous asset management firm, plans to deploy BRL400m in equity as part of a new joint venture with LDI, a local Brazilian investment company specializing in real estate. LDI, which is committing BRL44m to the JV, has a track record in high-end Sao Paulo residential, and the new project will be focused on that geography, says the company. “We’re targeting [annualized] IRR returns in the mid to high 20s,” says Ed McDowell, a principal at GoldenTree InSite, referring to returns for an individual project. A typical timeframe for the investment and return is 3.5-5.0 years, he adds. The total sale value of the planned JV is some BRL2.0bn. GoldenTree says it has committed $300m in equity to Brazil over the past two years, including several in residential high rises in the Sao Paulo area. GoldenTree InSite has $1.1bn worth of equity in real estate, while GoldenTree Asset Management manages $14.3bn. GoldenTree joins a herd of investors piling into Brazilian real estate, lured by a compression trade based on improving macro fundamentals and falling interest rates.

Brazil’s Cosan plans to raise BRL880m through a share offer to existing shareholders, it says, and obtain $800m in credit facilities from Bradesco. The share subscription funds will be used for expansion plans, CFO Paulo Diniz says on a call with investors. The credit facilities can be tapped if needed to help finance last year’s purchase of Esso assets in Brazil. Diniz says the sugar and ethanol producer is taking action because Cosan “may have some delays to get permanent financing” given the state of the markets. The Cosan SA unit will issue 55m common shares available to current holders until October 22. The Cosan Ltd unit, the majority holder in Cosan SA, will buy any shares remaining after the subscription period. The credit package consists of a $500m standby facility from Bradesco and a $300m pre-export credit facility. Cosan SA shares closed at BRL15.50 Monday, down from a previous close of BRL16.22.

Brazilian miner Paranapanema has agreed to sell its 100% stake in Mineracao Taboca to Serra da Medeira Participacoes, a unit of Peruvian miner Minsur, for BRL850m. The offloading of the asset is part of a reorganization of Paranapanema finances. In August, Paranapanema sold BRL920m in 2010 and 2019 convertible bonds as part of a 2006 asset restructuring agreement with creditors, in which it needed to sell convertibles or shares this year. Taboca operates an open-pit mine in the Amazon region extracting tin, iron and other metals. Earlier this year, Vale had been rumored to be considering the acquisition of Paranapanema’s Caraiba and Cibrafertil units.

Even Construtora e Incoporadora plans to raise BRL150m through a private subscription of 37.5m shares, it says. Shareholders will vote on the idea October 7. The builder raised BRL460m in an IPO last year. This year it has resorted to a BRL475m 5.5-year credit from Itau and BRL100m in 2012 debentures in the spring.