Category: Brazil

A roughly $630m financing for Brazilian sugar and ethanol startup CNAA will feature a novel sugar hedge that helps it raise lower-cost financing at longer tenors, says an executive close to the company. The instrument, put in place by Goldman Sachs and BNP Paribas, is designed to reduce the borrower’s exposure to fluctuating sugar prices for up to 5 years, covering 70% of production. The hedge will serve as a revenue guarantee to help CNAA raise around BRL440m in 13-year a syndicated B-loan via BNP and BRL450m in 15-year funds directly from the IDB. The company executive says he hopes pricing on the syndicated portion, which has yet to be launched, can come in the Libor plus 300bp-350bp range. CNAA has already raised a $120m pre-export loan via Bradesco, ABN AMRO and Banco Espirito Santo, part of the total $630m it is raising to develop new mills and increase production. CNAA has roughly $330m in equity, much of which is held by private equity funds belonging to Goldman Sachs, Carlyle Riverstone, Merrill Lynch, Discovery Capital, and Global Foods. Sugar and ethanol company SantelisaVale has a 28% stake in CNAA.

Brazilian wireless operator Vivo has offered to buy all outstanding 6.2m voting shares of Telemig Celular for BRL120.93 each, it said. It also offered to buy all 96,229 shares of Telemig’s operating unit for BRL2,100 each. As a part of Vivo’s BRL1.2bn acquisition of Telemig agreed in August 2007, it must make the two offers to minority shareholders. If the total amount is accepted, it will cost the wireless operator jointly owned by Telefonica and Portugal Telecom BRL953m. In May, its board approved a BRL990m capital increase to provide funds for the tag-along offers. Vivo will acquire the shares in auctions August 15 at the Sao Paulo stock exchange. Banco Espirito Santo Securities is managing the transaction.

Casan, the water utility in the Brazilian state of Santa Catarina has agreed to a BRL150.5m loan from BNDES. The facility expires in 2012 and pays 3.54% over TJLP. Casan plans to use proceeds to fund 14 water and sanitation projects.

Brazilian power utility company Light and shareholders are heard to have pulled a secondary sale of shares that might have raised close to BRL1bn. The deal was scheduled for later this week via Citi, Itau BBA and Unibanco. Selling shareholders BNDESPar, the investment arm of Brazil’s development bank that holds 33.7%, and French power company EDF which owns 6.6%, were looking to reduce their respective stakes by 50% and 100%. They opted to step away from the market following a 10.8% drop in the share price between May 30, the filing date, and July 11, says a banker close to the process. The Ibovespa has fallen 17.1% in the same period. Since a 2008 high of BRL28.19 on May 5, Light’s stock has dropped 20.3%, according to Economatica, which quotes Monday’s close at BRL23.30. Light has not made its decision official or set a potential new date for the deal. Light embarked on a marketing process for the deal at the end of June. The BRL1bn raise was initially estimated by bankers involved in the trade.

Brazil’s Banco Daycoval has sold $100m in 2011 bonds priced at 99.67 with a 7.250% coupon to yield 7.375%, in line with initial guidance of 7.375% area. The BB- rated issue comes about one month after the mid-sized bank placed $125m in 2010s to yield 7%, and was done to capture some of the demand the bank felt it left on the table in that sale. Demand for the 2011 series was about $130m, according to a bank official. The deal is the second from a $1bn program to boost the bank’s lending base as it expands. Banco Votoratim, Itau and HSBC managed the transaction.

Brazil’s Vivo has started a BRL500m 1-year promissory notes issue, paying interest at 106.5% of DI. The cellular operator jointly owned by Telefonica and Portugal Telecom joins a growing list of Brazilian issuers turning to large placements of 12 month paper in more volatile market conditions. Fellow telecom Telemar is preparing to place BRL3.6bn at DI+160bp. Promissory note registration in the year to the end of June was BRL9.265bn, according to the CVM, some 233% of the amount placed in the corresponding period of 2007. Vivo plans to use the proceeds to pay its outstanding debentures. Caixa Economica Federal is managing the operation.

Brazilian cellulose producer Aracruz has completed preliminary studies to install a new cellulose production facility in the Governador Valadares region of the state of Minas Gerais, requiring an investment of $2.4bn, says the company. The new facility could process 1.4m tons of cellulose per year, according to Aracruz. The project is pending approval of Aracruz’s board and could be operational by 2015. The firm also says the Governador Valadares region presents favorable conditions for two more facilities of this type.

Brazil’s federal police raided the offices of Eike Batista in Rio de Janeiro, saying the natural resources magnate and several of his executives were being investigated their potential role in a corporate fraud scheme, local news outlets reported Friday. The initial searches of the so-called Operation Midas Touch, however, didn’t yield any immediate evidence that Batista or MMX executives were involved in an alleged bribery aimed at benefiting the company, one local paper reported.

Daniel Dantas, the foremost executive of Brazilian investment fund Opportunity, and Naji Nahas, a wealthy investor with a colorful history involving large investments in Brazil, allegedly held multiple discussions on ways to profit from the eventual establishment of a sovereign wealth fund (SWF) for Brazil, Estado de Sao Paulo reported over the weekend. The paper quotes a police report signed by a senior official that affirms the authorities had tracked the two and that Nahas was reportedly using insider information to market his plan with potential investors. Dantas and several Opportunity executives were arraigned last week in relation to an investigation dubbed Operation Satiagraha.

Fitch has revised Brazilian industrial conglomerate Camargo Correa’s ratings outlook to positive from stable and has affirmed the company’s rating at BB. The agency also affirmed $250m senior unsecured bonds due 2016 at BB from Camargo Correa’s subsidiary CCSA Finance Limited. The move reflects the improved Brazilian economic environment that has favorably affected much of Camargo’s businesses, particularly in its cement, engineering and construction businesses, says the agency. “Additionally, it reflects increased diversity of revenues and cash flows across industry and geography, lower leverage and better debt-service coverage ratios,” Fitch adds. “Nevertheless, the effect of its aggressive growth strategy on credit protection measures remains a concern and has been incorporated into the ratings,” adds Fitch.