Category: Brazil

The pace of private capital deployment for Brazilian real estate appears unhindered by tightening credit conditions and rising aversion to the sector, particularly in developed markets. Three private equity (PE) firms are targeting some $3.8bn in fundraising dedicated to real estate, mostly commercial. PE investor Hines is pressing ahead with plans to raise a new vehicle for Brazil. The fund, apparently targeting $800m, is likely to be closed this year, say people familiar with the firm’s plans. Unlike the past two funds Hines – a real estate-focused shop – has raised for Brazil, the forthcoming vehicle will rely on contributions from a host of new investors, say people away from the process. Previous Hines funds were purely for Calpers, and this fund will tap other sources. Several senior Hines executives were spotted in Sao Paulo last week gauging market conditions. Elsewhere, Tishman Speyer is preparing a follow-up vehicle to its debut $600m fund raised in 2007, say people close to the company. Executives away from the process say the new entity will top $1bn in size. Brascan is also targeting a new $2bn real estate investment vehicle, according to people away from the process.

A number of overseas investors are looking to jump into Brazilian real estate for the first time. Funds both large and small, primarily based in the US, are examples of the interested parties spotted at the LatinFinance Brazil Real Estate Finance, Investment & Securitization seminar, held yesterday in Sao Paulo. While unsure about the format and subsectors of real estate they would target, newcomers see in Brazil the kinds of technical factors that led to a boom in Mexican real estate several years ago, say executives at the funds. Brazil, however, has greater scale and a more diversified asset base in which to invest, they add. Among delegates expressing interest in the country’s still hot real estate market are JER Partners – apparently eyeing a new fund for Brazil, Mexico, Colombia and Peru – and Explorador, a San Francisco based hedge fund seeking to partner up with another US investor to raise $500m for LatAm real estate. Also feeling out the markets are New York based HCP Real Estate Investors, Palo Alto based Broadreach Capital Partners, and Prudential, which has real estate investments elsewhere in the region.

Brenco, the Brazilian bioenergy developer headed by former Petrobras chief Henri Philippe Reichstul, has sold 13.4m megawatt-hours of reserve energy at a government auction, resulting in revenues of BRL2bn from 2010 to 2024. The energy will be generated from bagasse remaining from the crushing of sugarcane at its mills. Last week Brenco obtained BRL1.2bn in loans from development bank BNDES to fund part of the construction of the Alto Taquari-Mineiros facility, among the first of its mills, which will produce 220MW of electricity and 370m gallons of ethanol per year. Brenco’s initial investment plan calls for spending BRL5.5bn to develop 8 mills. To compliment its debt fundraising, it is aiming for an eventual $300m-$400m IPO.

Mitsubishi UFJ Asset Management and Bradesco Asset Management are expected to announce today a mutual fund that invests in Brazilian bonds. Japanese press says the fund – targeted at Japanese investors – could draw several hundred billion yen, or several hundred million dollars in assets. A Bradesco Asset Management official says the fund will be announced today, but declines to confirm any specific details. It is expected that Bradesco will manage the fund and arms of Mitsubishi Financial Group will market it in Japan.

Three subsidiaries of Brazilian transportation logistics company ALL are planning to raise BRL500m in 2018 bonds. ALL’s Ferronorte, ALL Malha Sul and Ferroban units will each take a BRL166m tranche of the sale. The notes pay 108% of DI. Proceeds will fund ALL’s investment plans at each unit. Credit Suisse is managing the transaction.

Geracao Paranapanema is returning to market in an attempt to raise up to BRL470m through the sale of debentures. The unit of Duke Energy International did not disclose a timeframe or additional financial details, as the transaction awaits approval from shareholders and Brazilian regulators. It would be a debut debenture from the firm, which pulled BRL750m in 2014s and 2016s at its last attempt through Citi and Itau.

Brazil’s Nova America is preparing to sell BRL307m in debentures, its first local debt issue. The transaction rated A on a national scale will pay DI plus 0.85%. The sugar cane grower and bioenergy producer will use proceeds to repay maturing short-term debt. Uinbanco and Itau are managing the sale.

Ecodiesel Brasil, the Brazilian biofuels shop, has restructured some BRL206m in debt following a period of financial difficulty related to the volatile nature of its sector and an overly aggressive capex program. The restructuring includes a BRL184.8m 4-year credit facility with a 1-year grace period from Bradesco, Fator, Fibra, BMG, Daycoval and Cedula. People close to the borrower say cost of the funds is in line with the company’s existing debt, understood to be in the 500bp-600bp over CDI range. The company also gained extensions on a BRL30.5m bank note with Banco Real, and restructured BRL35.2m in debt from entities it does business with. The company tapped G5 Advisors, a Sao Paulo-based boutique, to advise.

Global EM equity fund managers surveyed by Merrill Lynch are net overweight Brazil and – for the first time since it started doing the survey in 2006 – also slightly overweight Mexico. But the buyside is starting to cool on Brazil versus other BRICs, with a small majority saying it was the least preferred credit of the four. Russia is most popular BRIC, and EMEA overall is seen as the most attractive EM region. Investors generally are negative on LatAm and Asia equity, Merrill data shows. Some 72% of EM fund managers surveyed say that EM corporate profits growth will deteriorate slightly in the next 12 months. US assets are generally back in favor for institutional investors, supported by a widely held belief that the USD is undervalued. The Merrill survey also highlights how the credit crisis may be starting to change for the worse. “Dramatic changes in sector rotation and currency markets suggest that the credit crunch may be morphing from a financial crisis into an economic one as fears grow about the outlook for the global economy,” says Merrill. “Almost one in four believe the global economy is already in recession, and almost half the respondents expect the world to experience recession in the coming 12 months. Evidence that the economic slowdown is spreading to economies like Japan and the eurozone has dashed any remaining hopes of economic decoupling,” it adds.

Mexican manganese and ferroalloys producer Compania Minera Autlan is heard garnering interest from a handful of bidders, including Brazilian mining giant Vale. Vale – whose recent manganese sales hit a record – is understood to be looking at Autlan as prices for its main product hit historic highs. Autlan, which went onto the block earlier this year, has a market cap of $1.96bn and trades at a price to earnings ratio of 19.4x, according to Economatica. If sold to a strategic buyer, the asset could fetch a premium of 20% or more, taking its potential price tag above $2.35bn, says a Brazil-based mining analyst who asks not to be identified. “I don’t think it would make sense for Vale to acquire Autlan,” says Raphael Biderman, a natural resources analyst at BBI, remarking on the low grade of manganese found in the company’s mines. A handful of other steel and mining concerns are nonetheless understood to be studying the integrated operation. Autlan’s executives are said to be targeting a sale by October. Vale recently raised $12bn in a record equity follow-on whose proceeds are destined for capex and M&A. Autlan stock soared earlier this year amid speculation of a sale but saw a sharp correction in July. It closed yesterday’s session at MXP73.47, some 22% off of the July 21 high. Autlan, part of Grupo Ferro Minero, hired Lehman to advise it on a sale. Autlan did not return repeated calls seeking comment. A Vale spokesman declines to comment on M&A plans.