Category: Daily Brief

Camargo Correa is acquiring 22%-25% position in Cimpor, driving Brazil Inc’s pursuit of the Portuguese cement company into an awkward stalemate. Camargo bought a 22% share in Cimpor that belonged to Portuguese engineering firm Teixeira Duarte for EUR6.50 a share, valuing the deal at EUR961m. Moody’s says Camargo will partially fund this with long-term debt rather than cash. The cement specialist says it has purchased the option to acquire an additional 3% from third parties, making it the single largest entity to own a piece of Cimpor. The race is on to secure remaining smaller pieces of the company held by minority investors, say people close to the process. The next largest holder is Votorantim, which last week secured a 17% stake in Cimpor through a share swap. It also formed a shareholder agreement with Caixa Geral de Depositos, which owns 10%, turning the pair into a single bloc with 27%. “There are still remaining stakes [to go after,]” says an executive close to Camargo. “This soap opera isn’t over yet,” he adds. Among minority shareholders in Cimpor are Manuel Fino (11%), BCP’s pension fund (10%), Bipadosa (7%), Cinvest (4%) and the public (19%), according to Cimpor. The lunges from Voto and Camargo effectively shatter CSN’s bid to acquire a controlling stake in Cimpor, which is being done through a public tender that expires February 17. CSN seeks a controlling stake and up to 100% of the company. Its EUR5.75 a share offer via a cash bid has been rejected by Cimpor’s board, but could still draw interest from would-be sellers, estimate some analysts. If CSN acquires all of the stakes that have not been consumed by its compatriots Voto and Camargo, it could get 48%, though that seems unlikely at this point, given the offer is well below what Camargo paid. If it did, however, it would jointly own the company alongside the 2 Brazilians it is trying to steal market share from. Elsewhere, CSN has gone to Brazil’s antitrust regulator to file a complaint about the

In a novel development for LatAm platform financing, 2 issuers are turning to the bond market as bank lenders hit capacity. Mexico’s Grupo R and Brazil’s Schahin are preparing bonds to fund offshore drilling after having relied almost exclusively on banks in recent years. Following pushback in December, Grupo R has retooled a plan to raise $463m in 5-year funds in the loan market via BBVA. The problem, say syndicators, is that some banks were not comfortable with Pemex’s variable day-rate contract, which increases the risk of the deal from a creditor’s standpoint. The new plan involves having its RDS Ultra-Deepwater subsidiary issue $260m in 2017 NC4 bonds via Jefferies. It will also do a 5-year loan, expected at $225m, on the same terms as planned earlier. This means paying Libor plus 375bp in the first 2 years, 400bp in years 3-4, and 425bp in the fifth year, with juicy up-front fees of 300bp. The bonds are subordinated to the loan and a new cash sweep feature for the latter has helped get lenders comfortable with the combo. A US and Europe roadshow for the 144A/RegS bond begins today, ending February 23. Elsewhere, Grupo Schahin is heard readying a new $310m 6.5-year bond via Nomura for its Lancer platform, which in September renewed a 7-year contract with Petrobras. The 32-year old Lancer platform has typically relied on bank financing, the last of which was done in 2005. But with Schahin having just renegotiated a $800m 10-year contract for its troubled Black Gold platform, and the jumbo Black Diamond twin drillship seeking $1.4bn in 2010, the company is rightly concerned that banks may be hitting capacity for the its debt. “These guys need money,” says one syndicator. “I hope [the bond] gets done, but I have my doubts,” adds another lender. Lancer is apparently contingent on the notes receiving an investment grade rating. A bank market participant familiar with the borrower estimates the coupon could easily hit double digits given the quality of the collateral

Moody’s has chopped the rating on Brazil’s Lupatech to B2 from B1, amid continued cashflow and operating margin pressures. “Even though Lupatech has likely benefited from the resumption of bids for equipment and services in late 2009 by its most important client Petroleo Brasileiro, the conversion of the additional backlog into sales and cash flow should only materialize over the longer term,” it says. Moody’s notes that operational inefficiencies derived from persistent low capacity utilization are likely to continue. It sees total adjusted debt to Ebitda peaking at 13.0x in the first half 2010, up from 8.8x in September. The agency put the oil and gas equipment manufacturer under review in November. At the time, Lupatech was wrapping up a 7-month liability management operation that featured a BRL121m credit facility from the BNDES and a BRL320m 2018 convertible debenture sale that was 90% bought by BNDES. Lupatech also recently got debentures holders to waive breached financial covenants and postpone the next verification date to December 2010, when Moody’s expects Lupatech to be back in compliance with financial covenants. Lupatech has $275m outstanding in 9.875% coupon perpetuals. The rating outlook is stable.