Category: Brazil

Standard Bank has hired a team of six project financiers from ABN AMRO in Brazil, led by Guilherme Alice. The team will focus on the same kinds of projects it did at ABN, Alice tells LatinFinance – including power, oil and gas, biofuels and infrastructure. At ABN the group arranged Brazilian deals including a $105m financing for Abengoa’s ATE III transmission project. Standard’s pipeline includes financing a 270MW wind generation portfolio in Brazil’s northeast, Alice says, declining to elaborate on details. The other members of his team are Rodolfo Valente, Fabio Kono, Lucas Martinelli, Fabio Souza and Wilson Chen. The team reports to Fabio Solferini, CEO of Standard’s Brazil operations and to Jonathan Wood, global head of project finance.

A handful of asset managers in Brazil’s young hedge fund industry, including Maua and Quest – both run by celebrity central bankers – are up against the ropes and being pummeled by redemptions. A combination of bad individual bets on the market, and a broad-based investor exodus into higher-yielding cash products like CDs, leave multimercado (macro) hedge funds gasping for air. “Only in the last 12 months have we really been able to get a clear sense of [multimercado] managers’ strategies and abilities,” says Gustavo Coelho, manager at Arsenal, a Brazilian fund of funds. He adds that until recently, the industry had little critical mass and was riding on a global bid for Brazil that kept asset prices moving up, lifting al funds, regardless of ability. Assets under management (AUM) at Maua’s main macro hedge fund have evaporated to BRL277m from BRL1.32bn a year ago, according to the CVM. Quest’s 30-day macro fund has been sliced to BRL418m from BRL1.75bn a year ago. So far in 2008, the Maua vehicle has delivered returns of 3.21% while Quest is down 5.91%, according to Anbid. Both are underperforming the CDI benchmark, which has returned 6.51% YTD. Arsenal estimates Brazilian hedge funds have underperformed CDI by some 2.35%, posting an average nominal gain of 4.16% YTD. Not all macro hedge funds have succumbed. Gavea’s main global macro vehicle is up 7.08% YTD with roughly the same amount of AUM it had a year ago, while Hedging-Griffo’s Verde unit is firmer by 10.78% and has seen AUM swell by BRL1.5bn in the 12-month period.

Finnish engineering and technology corporation Metso will supply the main technology for Brazilian pulp and cellulose producer Aracruz’s new 1.5m tons/year bleached hardwood kraft pulp line for EUR400m, Metso says. The pulp line will be built at Aracruz’s Guaiba mill in Rio Grande do Sul. The expansion will raise the mill’s total annual capacity to almost 2m tons and is scheduled to start production during the second half of 2010, Metso says.

Brazilian Metals producer Paranapanema has completed a BRL919.5m convertible debentures issue. The debentures, immediately convertible into company stock, were issued in two tranches. A BRL200m 2010 series pays interest of 6% over the ICPA inflation index, and a BRL719.5m 2019 series pays IPCA plus 9%. The first and second series were purchased by 13 and 17 investors, respectively, including four foreign entities in each, the company says. Santander managed the transaction. The offering came as part of an asset restructuring required by a 2006 agreement with creditors. Under the agreement, Paranapanema had the choice to raise capital through debentures or do an IPO. The IPO was canceled in March. Vale has said it is in talks to acquire Caraiba Metais and Cibrafertil, two of Paranapanema’s four units.

Brazilian securities were most frequently traded among EM corporate and sovereign debt in the second quarter, according to EMTA’s 2Q survey of secondary trading. The $241bn in Brazilian turnover is up 1% from 1Q, but down 20% from 2Q07. Argentine debt ranked third – behind South Africa’s $109bn – with a volume of $100bn. Brazil’s 2040 global bond remained the most frequently traded industry instrument, accounting for $20bn, up 9.7% from Q1 despite being down 63% year-on-year. Mexico saw one of the sharpest year-on-year drops in the region, falling 90.2%, to $36bn from $372bn.

Moody’s has downgraded the corporate family rating of Unialco, the Brazilian sugar and an ethanol producer to B3 from B2, and kept it on review for possible further downgrade. “The downgrade reflects primarily the deterioration of Unialco’s liquidity profile, credit metrics and operating performance, due primarily to the impact of lower than expected sugar and ethanol prices,” says Moody’s. The corporate abandoned a $150m senior unsecured notes issue announced last October 2007, leaving it with a weaker liquidity profile. Unialco reported net sales of BRL237m and Ebitda of BRL36m for its FY ending March 31, down 20.3% and 53.3%, respectively compared to FY 2007. Meanwhile, total financial debt increased to BRL408m in FY 2008 from BRL206m in FY 2007, resulting in an increase in Debt to Ebitda to 11.3x from 2.7x in 2007. “Due to this increase in leverage, Unialco has been forced to request waivers on its bank loan financial covenants. This comes at a time when the company recently changed its senior management team leading to possible changes in operating strategy,” says Moody’s. The downgrade review focuses on the company’s business plan and projections to be provided by the new management team, as well as its ability to improve the maturity profile and renegotiate covenants.

ArcelorMittal has agreed to acquire London Mining’s Brazilian iron ore operations for $810m and, separately, to buy an 80% stake in a Brazilian port project from Canada’s Adriana Resources for $42m, in a move to increase its access to raw materials. The steelmaker intends to pay for both transactions with cash on hand, a spokesman tells LatinFinance. Arcelor now plans to invest up to $700m to increase production at its newly acquired mines, located in the state of Minas Gerais. It will use the port facility, to be completed at Mangaratiba in the state of Rio de Janeiro at a total cost of $250m, to ship its ore to steel production facilities throughout the Atlantic basin. Arcelor will develop the port jointly with Vancouver-based Adriana, and the two will share capacity in proportion to their ownership. RBC advised ArcelorMittal on both transactions. UBS and Kaupthing Singer & Friedlander advised London Mining.

Chicago-based Equity International has deployed $100m to help capitalize private Brazilian logistics company AGV Logistica. The move is the investment company’s first foray into the logistics sector. Equity Internatioanl has had a successful LatAm track record with private investments in Gafisa, BRMalls and Homex, all of which are now public and have become leaders in their respective sub-sectors. AGV, established in 1999, has 30 facilities in 11 states in Brazil. “AGV represents a strategic extension of our investment portfolio in Brazil,” said Gary Garrabrant, CEO of Equity International. The deal follows successful ventures in the logistics sector by real estate private equity firms such as Hines, which owns and operates three units in Sao Paulo. As Brazil’s economy expands, the need for the transportation and storage of goods and consumer products increases and with it, the need for logistics centers. Many of Brazil’s logistics facilities are old, or outdated, says one investor eyeing the space. That makes the sub-sector a compelling option for real estate investors to diversify their product and regional strategies.

The board of Brazilian software company Totvs has obtained a BRL205m loan from development bank BNDES to compliment a sale of BRL200m in debentures. The 6-year facility will pay TJLP plus 1.5% and be used to fund the development of new products. Totvs has also launched the private placement of BRL200m 2019 debentures backed by a guarantee from BNDES, paying TJLP plus 1.5%. The bonds are being offered to Totvs shareholders during a 30-day subscription period, with BNDES purchasing any unsubscribed notes. In July, Totvs and announced talks to acquire competitor Datasul for BRL480m plus 4.6m Totvs shares.

As expected, Bradesco has signed deal with Bank of Tokyo-Mitsubishi to offer Brazilian fixed-income investment funds to Japanese investors. Bradesco’s asset management unit will manage the first fund, to be distributed in Japan by Mitsubishi’s asset management arm. The banks did not give an indication of the fund’s size. The operation is part of the Brazilian bank’s plan to expand its presence internationally, following the announcement earlier this month that it plans to open brokerage units in Dubai, Tokyo and Hong Kong.