Category: Brazil

Brazilian metal producer Paranapanema plans to place BRL950m in convertible debentures within the next six months. A BRL200m 2010 tranche is set to pay 6%, while a BRL750m 2019 tranche pays 9%. The bonds will be immediately convertible into shares at the holder’s discretion, according to a filing which does not detail a conversion premium. The offering is part of an asset restructuring required by a 2006 agreement with creditors. Under the agreement, Paranapanema has the choice to raise capital through debentures or do an IPO. Plans for an IPO were canceled in March. Itau is managing the debentures sale. Separately, mining company Vale reiterated last week that it is eyeing the purchase of two of Paranapanema’s three main assets.

Regulators have approved the issue of BRL150m in 2010 debentures from BIC Arrendamento Mercantil, the leasing unit of BicBanco. The notes pay 150% of DI. Proceeds will expand lending operations. HSBC is coordinating the issue. A recent change in regulation has made leasing debentures a less attractive funding option for banks and has contributed to a drop in the number of such deals. At the same time, it has led to an increase in other types of funding including CCBs, or bank notes, say local DCM bankers.

Brigitte Posch has left Deutsche Bank, where she was head of LatAm securitization, to join Pimco. At Deutsche, she led an effort to establish a new Brazilian ABS asset class called precatorio, which involves the securitization of settlement payments by federal, state and municipal governments. Separately, Pimco’s EM team recently lost corporates analyst Adam Borneleit, who left to join BlueBay Asset Management in London.

Several global mining and steel companies are eyeing Namisa, a collection of assets belonging to Brazil’s CSN which the company says make up an integrated mining complex, including a mine and logistics to the ocean. Among the suitors are Russian steel company SeverStal, Indian miner Essar, China’s Shagang Group, say bankers away from the process. Other potential buyers include miners Anglo American and Cleveland-Cliffs, as well as India’s JSW Steel, speculate people seeking participation in the transaction, though the process is heard in a second round of bidding, and some of the names initially interested may already be out of the running. CSN hired Goldman Sachs to advise it on the sale, which the company estimates should be worth $10bn. Goldman Sachs declined to comment and CSN executives did not return calls.

Brazilian power utility Eletrobras has filed to list ADRs on NYSE. The company has two OTC-traded Level I ADRs, and plans to consolidate them under one NYSE ticker. The goal is to improve liquidity and boost the share price, as well as create an additional financing option for future investment programs, Eletrobras says. The company is also syndicating a $450m B-loan, part of a $600m CAF A/B financing. Citi, SocGen and BNP are leading the 7-year B loan, which carries a margin of Libor plus 150bp. Proceeds to the state-owned BBB minus rated credit are for capex.

Morgan Stanley will likely deploy some $800m in new equity to Brazilian real estate in the coming few years through various vehicles, Alfonso Munk, executive director at the shop’s Brazil merchant banking office, tells LatinFinance. Morgan Stanley plans to set up a joint venture with Brazilian Securities – to be called Brazilian Capital – to provide alternative financing products such as mezzanine debt and preferred equity for real estate projects. “This will be a new product for Brazilian real estate,” says Munk, who adds that only a handful of subordinated debt deals have been done in Brazil to date. The venture will invest from a fund worth up to $100m, with 90% or so of the capital coming from Morgan Stanley. The shop is also closing a seventh global fund, called MSREF VII, expected to be worth $9bn-$11bn. Up to 5% of that will be allocated to LatAm, with roughly 80% going to Brazil, says Munk. For Brazil, that would mean roughly $450m. Funds would also be drawn from Morgan Stanley’s special situations fund, which focuses on minority stakes. One likely possibility is upping the shop’s 20% stake in Abyara to 30%, and increasing a 12% stake in Bracor, a commercial developer, to 18%. The two investments and others from the special situations fund could amount to $200-$300m in the next 3 years, with the Abyara stake worth up to $100m, notes Munk.

Brazilian mining giant Vale is denying rumors that it is in talks to acquire Freeport-McMoRan, the US copper and gold giant. Vale spokesman Fernando Thompson describes as baseless market chatter that Vale is looking to acquire Freeport, or that it was in talks with any other companies about acquisitions. NYSE-listed shares of Freeport traded as up as much as 8.35% Friday – apparently because of the M&A rumors – but ended the session up just 3.79% as Vale poured cold water on the talk. Thompson meanwhile reiterates that Vale is in talks to acquire assets belonging to Brazil’s Paranapanema. Vale preferred shares closed down 0.34% Friday at BRL40.16.

Brazilian developer Rossi Residencial has formed a partnership with Amazon region-based builder Construtora Capital. The two will develop a portfolio of projects in Brazil’s north expected to reach about BRL1bn in value. Rossi will structure the project financing and Construtora Capital will be responsible for construction and management. Rossi signed a 1-year BRL200m loan with Bradesco in March, following cancellation of an IPO in February. As the market matures, Brazilian developers are turning to partnerships with regionally based builders to expand into new areas with economies of scale. Last moth Cyrela announced a similar partnership with Redil and Construtora Lider, through which it plans to launch more than BRL1bn in projects in 2008-2009.

Moody’s has cut the outlook to stable from positive on Brazilian pork and poultry processor Sadia’s Ba2 local currency corporate family and senior unsecured foreign currency ratings. The actions affect $250m in guaranteed senior unsecured notes due 2017 issued by Sadia Overseas with an unconditional and irrevocable guarantee from Sadia, says the agency. The change in outlook was prompted by a sharp rise in soy and corn prices, the main raw material input for poultry and pork production. Moody’s also worries about Sadia’s capital intensive growth plans for the next few years, which are likely to pressure the company’s operating margins and free cashflow, the agency says. In June, S&P upgraded Sadia to BB+ from BB.

The IMF is slightly raising its projections for Brazilian and Mexican growth, despite a downbeat overall assessment of the global economy released this week. Brazil will expand by 4.9% and 4.0% this year and next, a 0.1% and 0.3% revision higher, respectively, versus April forecasts. Mexico is set to see GDP growth of 2.4% this year and next, up 0.4% and 0.1%, respectively versus earlier projections. Global growth is meanwhile projected to moderate from 5.0% in 2007 to 4.1% in 2008 and 3.9% in 2009. And EM expansion is forecast to ease to around 7% in 2008-09, from 8% in 2007. In China, growth is now projected to moderate from nearly 12% in 2007 to around 10% in 2008-09. “The global economy is in a tough spot, caught between sharply slowing demand in many advanced economies and rising inflation everywhere, notably in emerging and developing economies,” says the fund in a World Economic Outlook update.