Category: Brazil

Several US REITs are looking at Brazil, some for the first time, as paltry returns at home lead them to seek greener pastures. First timers like Weingarten Realty, based in Houston, are heading to Sao Paulo and partnering up with locals to develop commercial properties, including malls and industrial facilities. Also rumored among new arrivals are Simon Properties, General Growth Properties and Duke Realty. “The development opportunities in the US are extremely limited for a couple for reasons,” says John Blumberg, founding partner of Black Creek Capital, a holding company with a number of US REITs and Mexican housing vehicles worth some $6.3bn. Blumberg is looking to raise a fund for Brazil. Among the established players are AMB, which has set up a JV with Cyrela Commercial Properties, and Kimco Realty, in partnership with local developer REP to build outdoor mall areas in suburban regions. Prologis, one of the largest REITs specializing in logistics centers and facilities, also has a small but growing portfolio of real estate assets in Brazil. The risk for all new arrivals is similar to those faced by seasoned locals. However, beyond cultural and language barriers, lack of familiarity with local tax and licensing policy can lead to unexpected delays and costs, say Brazilian developers.

BNDES is not planning another debt issue in the international markets, a spokesman tells LatinFinance, despite reports in the Brazilian press that it had cancelled a scheduled bond sale. The Brazilian development bank sold $1bn in 2018 notes in May to refinance a 1998 issue. In July it postponed a planned BRL1.5bn 2010 debenture issue targeted at local markets.

Brazilian hedge fund Maua posted improved monthly figures in August, taking a very small, but much needed step towards recovery following a devastating first half. Its Maua Brasil Fund, a macro multi-strategy vehicle, was up 0.47%, above the 0.31% in July, though still below its 1.05% 2007 total return. The Maua Brasil Plus fund, focused on fixed income, rose 0.93%, topping its minus 1.52% 2007 average and the minus 14.46% 2008 average. Its Maua Brasil Equities fund was down 8.23%, better than July’s negative 9.35% and the minus 10.55% returned by the Bovespa in August. “At the margin we are buyers of stocks in Brazil,” say the fund’s managers in a letter to investors. They add that recent declines in share prices have led to a move away from a net negative position in equity. Maua has experienced substantial redemptions in 2008 and saw assets under management at its Maua Brasil fund fall to BRL277m last month from BRL1.3bn in August 2007.

Unibanco, which has a 52% stake in the Brazilian insurance joint venture Unibanco AIG, is looking at potentially buying AIG’s 48%. The unit’s president Jose Rudge, suggested on a conference call late Tuesday that Unibanco has the first right of refusal if the stake goes up for grabs. “We are very attuned to opportunities that may arise from this and would analyze the opportunity to buy if it were for sale,” says Rudge, adding that this would be a natural step for Unibanco. He declines to comment on whether AIG had offered to sell, or if Unibanco is in direct acquisition talks. Unibanco AIG Seguros e Previdencia had BRL12bn in assets for the fiscal year 2007 and posted revenues of BRL5.6bn during the period. Rudge was not available for additional comment.

Brazil and Chile could see their Moody’s ratings upgraded by the end or 2009, according to Credit Suisse, while Venezuela could be in line for a downgrade. The shop analyzes macro forecasts for 27 EM countries, using Moody’s and its own data. When using its own numbers, the model finds that Brazil’s Ba1 and Chile’s A2 would be raised a notch, while Venezuela’s B2 could be lowered a notch. When using Moody’s data, it finds the only change is the Brazil upgrade. Moody’s is the only one of the three major ratings agencies not to rate Brazil high-grade, keeping it one notch lower.

Barclays could end up with the beginnings of an investment banking unit in Brazil if it succeeds in acquiring parts of Lehman. Reuters reports late Tuesday that Barclays has agreed to buy Lehman’s main investment banking assets for about $2bn, citing an unnamed source. According to the Wall Street Journal, Barcap wants to acquire the equity and debt underwriting, M&A and securities trading units. It is unclear what the deal would involve, but Brazil-based bankers speculate that Barclays might establish a local beachhead via an acquisition. Lehman had begun building a structured products team focused on Brazilian fixed income, and it was slowly establishing a name in Sao Paulo, where it opened an office in 2007. The US bank hired Alex Maya, formerly of Morgan Stanley, and Rio Bravo’s founder – veteran senior banker Winston Fritsch – to head the new branch. It was working on adding cross border M&A and financing went the head office went belly up. Barclays meanwhile had been hoping that an acquisition of ABN AMRO – which failed – would beef up its local LatAm investment banking capabilities. Barcap declined to comment.

Brazilian car-rental agency Localiza started a roadshow yesterday for a BRL300m 2012 local bond issue. The rate will be set during bookbuilding, which is expected to conclude September 30. Proceeds from the transaction rated Aa2 on a national scale will expand Localiza’s fleet. Unibanco is managing. The issue follows a recent sale of BRL300m in 2011 bonds at DI plus 1.80% via Bradesco.

French engineer Alstom’s Alstom Hydro unit has won a contract valued at approximately EUR500m to supply turbines and generating equipment to the Santo Antonio hydroelectric project in Brazil’s Amazon region. A consortium led by Odebrecht, which won a government auction in 2007, is building the 3,150MW facility. Santo Antonio, the first of two large facilities on the Rio Madeira river, should be complete in 2012, at a cost of more than BRL12bn.

Banco Itau, the Brazilian banking giant, is rumored to be talking to Merrill Lynch about acquiring some of its Brazil assets, following the latter’s fire sale to Bank of America. Besides investment banking and brokerage, Merrill has a fledgling wealth management, asset management and private banking operation in Brazil. However, local markets are on edge amid spillover volatility from the Wall Street meltdown, and prospective buyers will be cautious. Itau is already quite substantial – and profitable – following a number of recent key hires. “We don’t know where the market is headed for 2009, so it doesn’t really make sense,” says a Sao Paulo-based senior banker familiar with both operations. He adds that Merrill’s large investment banking team would be hard to digest for most institutions at a time when the local fee pool is expected to shrink. Headhunters estimate that Merrill spent at least $40m this year building up the Brazil team, mainly through poaching from Credit Suisse and UBS. “They went there for large sums of money, but they haven’t really done anything,” says the Sao Paulo based banker, adding that this was due more to hostile markets than lack of talent. Merrill Lynch International chairman and head of LatAm James Quigley was scheduled to be in Brazil yesterday and the shop declines to comment on the Itau rumor. Analysts say the LatAm unit’s survival at BofA depends on Merrill making a strong case for the new owner to keep it. Merrill’s growing platform in LatAm is seen as complementary to BofA’s virtual nonexistence in the region, as well as the latter’s stated interest in international expansion. But BofA has historically displayed little appetite for LatAm, least of all investment banking, and it may be looking to keep it that way. In the year to September 15, Merrill had a 3.3% share of the regional core investment banking (M&A, ECM, DCM) fee pool, with $33.4m in revenue, according to Dealogic. Itau was fourth with $100.3m, or 9.9%.

CSN, the Brazilian steelmaker and burgeoning iron ore exporter, is heard to have piqued the interest of a handful of large global bidders in its auction of Namisa, a somewhat integrated iron ore mining complex. Bankers away from the process say a Japanese consortium including Nippon Steel, Itochu and Mitsubishi is being advised by JPMorgan and has presented a strong bid. Chinese steelmaker Shangang Group is also heard to have been looking at the asset, though its bid could be losing traction because of slow decision making on how to proceed. Severstal, the Russian group is also apparently looking. Analysts estimate the asset is worth $5bn-$8bn, well below the up to $11bn CSN said earlier it would seek in the auction. Bankers away from the process say the highest bid stands at some $8.5bn, raising the question of whether CSN will be willing to sell. Goldman is advising CSN.