Category: Brazil

Fitch has assigned foreign and local ratings of BBB minus (stable) to Brazilian media conglomerate Globo. The agency applied the rating to $325m in 9.375% perpetual notes issued in 2006 and $200m in 7.250% senior notes due 2022. “Globo’s credit ratings are supported by its strong business position and solid financial profile. Balanced against these credit strengths is the correlation of the company’s business with the Brazilian economy, increased competition and moderate regulatory risk.”

Moody’s has changed the outlook for Brazilian foods processor Perdigao, noting its lower operating margins and higher than expected working capital needs in the first two quarters of 2008. “Total debt increased in the … period, leading total debt to Ebitda to increase to 3.7x and 3.8x,” says Moody’s. The agency also affirmed Perdigao’s Ba1 local currecy corporate rating.

Brazil’s Telemar has pulled its planned $1.5bn bond offering, originally scheduled to price as early as yesterday. Bankers on the deal say a jittery investor base convinced the company to step back. The market for new deals has been unwelcoming since Labor Day, and worsened Tuesday as jitters emanated from subprime-related losses at financial institutions. “It’s not the week to bring a large EM deal,” notes Anne Milne, a strategist at Deutsche Bank. The high grade borrower’s failure to generate enough interest bodes ill for the long line of hopeful issuers waiting in the wings. “This means our crisis isn’t over,” adds Milne. “People are going to wait longer to than they thought to get things done, if they get them done at all.” Telemar could still return if conditions improve, but analysts say that is unlikely in the coming several days. Investors apparently didn’t feel comfortable putting in orders for a new deal and asked that the offering be held, say executives running the trade. Bankers add Telemar would also run the risk of seeing its new bonds trade down, which has negative implications for future issuance. On Monday Telemar slashed plans for a 30-year tranche and was hoping to clinch 10-year bonds at 8.50% and 5-year bonds at 7.75%. It was last heard considering reducing the deal down to $1.0bn before it pulled out altogether. Bankers say the company has alternative sources of financing to fall back on, namely the Brazilian loan market. Citi, Santander, Banco do Brasil, Bradesco and Itau were hired to lead the transaction, Telemar’s first since December 2003, according to Dealogic.

Brazilian beef producer JBS is heard seeking a new $1.4bn in the US loan market to pay down a bridge it took out in early 2007 to acquire Swift Foods. Credit Suisse and GE Capital are leading the new facility, rumored in the Libor plus 550bp area, say bankers away from the deal. GE Capital is leading a $750m revolver while Credit Suisse is handling a $650m term loan. The deal is being offered to participants at a discount to offer spread of 97, meaning they can collect a 300bp up-front fee upon entry into the facility. In last year’s acquisition of Swift by JBS, JPMorgan advised HM Capital, the owners of the US company, while Rothschild advised JBS. JBS officials declined to comment on the new facility.

Brazilian concessionaire CCR is days away from signing a $310m financing package for the first phase of development of Sao Paulo’s Via 4 metro line, say people close to the company. A signing could come as early as Monday, with funding soon after. An IDB A/B loan is being arranged, with Banco Real leading the B portion. A 12-year B loan expected at close to $240m is heard with a margin of around 200bp, while a 15-year A loan from the IDB will cover the difference at a presumably higher margin. Strong interest from at least 6 other non-Brazilian commercial banks may lead to a downsizing of the A portion and an increase in the B, says an executive on the deal. Local giants Itau and Bradesco are not expected to participate. The Linha 4 consortium is made up of CCR (58%), a Banif fund (30%), Mitsui (10%) and operators RATP and BRT, from France and Argentina respectively, each with 1%. Linha 4 will be responsible for providing the trains and operating the metro lines, while the government of Sao Paulo is building most of the infrastructure. In order to bring BRL revenues in line with dollar liabilities, CCR says it will likely conduct periodic rolling hedges, meaning it will every 6 months or so lock in an FX hedge for the following 2-3 year period. “That seems to be the best way to do it,” says the executive, noting that this is more cost efficient than a long term cross currency swap.

Brazil’s Telemar, which is scheduled to wrap up Wednesday a three-continent roadshow for a $1.5bn bond sale, has axed plans for a 30-year tranche and put out price guidance for its planned 5 and 10-year notes. The telecom is heard to have found pricing for its desired 2014, 2019 and 2039 tranches higher than expected and chose to eliminate the longest piece, say people familiar with the deal. Bankers away from the deal speculate that new 30-year paper for comparable Brazilian high-grade, not seen in LatAm since the credit crunch, would price well north of 9.00% today. For the 2014 tranche, Telemar has issued guidance in the 7.75% area, and is shooting for the 8.50% area on its 2019s. The size of each tranche remains to be set. As the first significant deal through the gates this month, the BBB minus/Baa3 rated deal is expected to mark the new issue premium for LatAm high-grade. Proceeds will go towards funding the BRL13bn acquisition of Brasil Telecom agreed in April. Citi, Santander, Banco do Brasil, Bradesco and Itau are managing the transaction.

Brazil’s JBS has signed up for a level 1 ADR program. The Level 1 status allows for OTC trading but not a direct listing of shares on an exchange. As a result JBS does not plan to issue new stock or increase its capital through the new listing, though it presumably aims to increase exposure to a new investor base. The meatpacker has gained a large presence in the US after buying Swift in 2007 and Smithfield Beef and National Beef earlier this year. It expects to implement the program by October.

Moody’s has upgraded the Brazilian steelmaker and iron ore miner CSN to Ba2 with a positive outlook from Ba1 (positive). The agency cites the company’s strong debt protection metrics and liquidity over the past years. “The rating action reflects CSN’s maintenance, in spite of elevated dividends and share buybacks, and substantial ongoing investments to expand iron ore mining and logistics operations,” says Moody’s. The positive outlook reflects the expectation that CSN will continue to report strong operating margins and boost sales after increasing its ore, cement and long steel production capacity in the near term and the potential sale of a portion or all of CSN’s shares in its Namisa iron ore mine subsidiary. “Moody’s expects that the proceeds from the sale of shares in Namisa would help CSN to maintain adequate leverage and liquidity during the execution of its large capex program in the coming years,” the agency states. Namisa bids were due Monday, with executives away from the process expecting a price tag of roughly $8bn – shy of the up to $11bn the company said it would seek for the asset.

Brazil’s BNDES and Argentina’s Banco de la Nacion and Banco de Integracion y Comercio Exterior (Bice) will today sign a cooperation agreement in Brasilia to finance regional infrastructure projects designed to boost Brazilian and Argentine exports. Last month, BNDES announced a plan to make available $200m in financing for Brazilian companies to buy Argentine goods.

Merrill Lynch has tapped Alexandre Bettamio, head of its Brazil investment banking unit, to be its new Brazil country head and president of the shop’s local bank, called BMLISA. Bettamio replaces Richard Rainer, who left the US shop’s Brazil operation shortly after Bettamio’s arrival from UBS Pactual earlier this year. Bettamio and a team of bankers left Pactual for Merrill in March, and were joined by two senior Credit Suisse bankers, Sebastien Chatel for ECM and Adriano Borges for investment banking, at Merrill’s Sao Paulo office. Merrill says it is establishing a new country head structure in the region in order to better integrate its markets and investment banking division with its wealth management business in each country. Country heads will work with wealth management executives to grow business, says Merrill. Daniel Gonzalez, country head for Argentina, will assume the same role for Chile, Peru and Uruguay. Alberto Ardura, who covers fixed income, currencies and commodities in Mexico, will become country head too. Andres de Corral and Andrew Gray will be co- heads of CentAm, Caribbean and Andean regions. Separately, Carlos Gutierrez, head of Mexico’s investment banking business, will become chairman of ML’s LatAm business. James Quigley continues as president of LatAm and Canada.