Category: Brazil

Stephen Everhart has left the Overseas Private Investment Corporation (OPIC) to teach project finance and risk management at the American University in Cairo (AUC). After tours in Brazil, Mexico, and Venezuela with the World Bank and IFC, he took over as OPIC MD in 2002. While at OPIC, Everhart led initiatives to boost CAFTA-DR exposure and build out an education portfolio.

The World Bank has approved its biggest ever loan to a sub-national, a $1.1bn loan for the Brazilian state of Rio Grande do Sul. The 30-year development policy loan starts with a $650m tranche and disburses an extra $450m on completion of certain conditions in the agreement, expected by 2009. The World Bank declines to state the rate. Proceeds will be used to restructure part of the state’s debt and smooth out its debt servicing profile, as part of a fiscal sustainability program. Rio Grande do Sul suffers one of the worst fiscal and debt profiles in Brazil, in which debt is 2x revenue, according to the lender.

Brazilian rental car provider Localiza is evaluating its options for debt raising, IR director Silvio Guerra tells LatinFinance. “At this point we don’t want to issue more equity,” he says, explaining that debt is the cheaper option, and the company is only about 1.3x levered. Localiza completed a non-deal road show in Europe with Goldman Sachs last week to meet existing equity investors. It also met investors in New York this week. Its board this month authorized raising up to $500m in the international or domestic capital markets.

S&P has raised the credit rating of Brazilian miner Vale to BBB+ from BBB, on stronger liquidity following its $11.56bn equity follow-on. The offering “adds to the company’s liquidity and improves its ability to handle its aggressive capital expenditure program,” the agency adds. S&P expects strong iron ore prices and profitability in other metals to enhance Vale’s cashflow in the next 2 years. It expects credit metrics to remain stable, despite possible merger transactions and aggressive capex targets for 2008 and 2009. Vale had been on review for an upgrade since June 16. Its Vale Inco unit was also raised to BBB+ from BBB.

Despite Brazil’s improved fundamentals and investment grade ratings, inflation pressures and global economic trends mean its economy could be in for a tricky time over the next year, characterized by continued interest rate hikes. “My bet is that the Brazilian Central Bank is nowhere near the end of the rate hike cycle,” Gray Newman, senior LatAm economist at Morgan Stanley, told a Brazilian-American Chamber of Commerce event in New York. His shop sees an interest rate peak of 14.25%, from 13.00%, on the back of high commodity prices, that will boost Brazilians’ purchasing power, adding to inflation pressures. If the currency continues to strengthen, Newman says, many non-commodity producers should also see vulnerability from a balance of payment perspective. Morgan Stanley sees the BRL ending 2008 at 1.70 to the USD, versus BRL1.57 Tuesday.

Revlon has sold its Bozzano brand, a men’s hair care and shaving line of products, and certain other non-core Brazilian brands to Hypermarcas for approximately $104m in cash. The transaction was effected through the sale of Brazilian subsidiary Ceil Comercio E Distribuidora. Revlon says its brand color cosmetics will continue to be marketed in Brazil through a third party distributor.

UK based mining company Rio Tinto is planning to invest $2.5bn in a major expansion of its Corumba iron ore mine in Brazil. The work will boost mine capacity to 12.8m tons from 2m tons, Rio Tinto says, with new production expected to start in Q4 2010. The Corumba investment brings to nearly $11bn the total capex Rio Tinto has committed since 2003 to develop its iron ore business, the company states. Rio Tinto will also undertake a feasibility study, to be completed by mid 2009, for a phase II expansion that would take capacity to 23.2m tons per year, the company adds. The expansion of Corumba is designed to capitalize on increased demand for iron ore in South America and the Middle East.

Banco do Brasil and South Africa’s FirstRand are creating a new financial institution to focus on car loans in Brazil. The Brazilian bank plans to invest BRL980m in the new venture that is expected to start operations in the first half of 2009. BdB will own 73.5% of the new institution and FirstRand the rest, according to BdB. The Brazilian bank expects the new venture to control a 20% share of the Brazilian car loan market in 8 years, it says.

The BNDESPar unit of Brazilian development bank BNDES has suspended for up to 60 days its issue of BRL1.5bn in 2010 debentures. It has decided to wait due to the volatility in the capital markets, according a BNDES official. The notes rated AAA on a national scale are part of a BRL6bn program. The bank had not yet indicated the rate it expects to pay. Banco do Brasil is managing the operation, with Bradesco and Caixa Economica Federal co-managers.

Brazilian regulators have approved developer Trisul’s issue of BRL200m in 2013 debentures. The notes, rated A on a national scale, pay interest at the DI rate plus 2.5%. The offer marks the debut debenture issue for Trisul, formed from the merger of real estate companies Tricury and Incosul. The developer plans to use proceeds to acquire new property and for working capital. Bradesco is managing the transaction. Separately, regulators also approved a BRL300m 2013 debenture issue from fellow developer MRV. The issuer plans to define the rate on the AA minus notes this week. The transaction is the first debenture sale for MRV, led by Itau. It plans to acquire new property with the proceeds.