BES Investimento do Brasil, an 80%-owned subsidiary of Portugal’s Banco Espirito Santo, is preparing to pitch investors a 5-year bond. Following a $150m debut last year, the bank is heard targeting a larger size, perhaps $350m, as it looks to grow its investor base. A team targeting institutional investors will begin Monday in LA, visit Boston Tuesday and finish in New York Wednesday, according to bankers managing the sale. A second group will focus on retail and begin Monday in Miami, visit London and Switzerland before finishing Thursday in Lisbon. Deutsche Bank, Espirito Santo and Standard Bank are managing the 144a sale. BESI Brasil is rated Baa2/BBB minus. The bank raised $150m from the sale of 2012 bonds at a 6.0% yield in May 2009. Bradesco owns 20% of BESI Brasil.
Category: Daily Brief
Pine Sets Tier 2 Guidance
Brazil’s Banco Pine has set price guidance of 8.875% area for a new 7-year Tier 2 bond, expected to price late today or Monday. The Ba3 transaction is expected to be at least $150m in size, and follows an Asian, US and European road show. HSBC, Credit Suisse and Banco Espirito Santo are leading the sale. Interest in subordinated bank bonds is picking up, with a Baa2 rated $750m 10-year Tier 2 from Banco Votorantim that priced to yield 7.375% last week. Pine’s last dollar bond was a 7.375% coupon $150m 2-year deal in June 2008.
JBS Sticks to US IPO Plans: Reports
JBS, the Brazilian meatpacker, plans to continue with plans to issue shares in US, though the timing of the deal has been delayed, CEO Joesley Batista told local news outlets in Sao Paulo Monday. The executive says the offering, expected to be worth $2bn, won’t occur until after the company release Q4 results and may occur during H1. The original timeline involved a placement in January 2010. JPMorgan advised JBS in its acquisition of Bertin in Brazil and Rothschild and Rabo advised it on its US acquisition of Pilgrim’s Pride in Q4 2010. JBS is raising equity in the US through an IPO and in Brazil through a private share placement to help finance the deals and capitalize the companies. JBS also announced Thursday it has launched a tender offer for its 9.375% 2011 bonds, of which there are $275m outstanding. The company’s string of acquisitions last year triggered change of control clauses, forcing JBS to buy back the bonds. The buyback period goes through March 1. JBS was unavailable for comment.
Copeinca Fishes for 9s
Early price expectations for a debut bond from Peru’s Corporacion Pesquera Inca (Copeinca) are in the mid to high 9%s, according to investors. The fishmeal and fish oil producer is expected to bring a $150m 7-year deal in the middle of next week, following a US, Asian and European road show. Copeinca plans to use proceeds from the BB minus transaction to repay debt. Credit Suisse and Santander are managing the sale.
BdB Eyes H1 Equity Sale
Banco do Brasil is finalizing plans to issue up to BRL6bn in new shares in the coming month. The deal will likely come to market before the end of H1, according to a finance official. The sale is part of an equity raise of BRL8bn-BRL10bn the bank is conducting whose objectives include bringing BdB’s free float up to the 25% level required by the Novo Mercado. It would also allow government shareholders to maintain their stakes. Brazil’s treasury owns 66%, state pension plan Previ owns 10% and BNDESPar 2.5% of the bank’s total equity. If BdB issues BRL10bn in primary shares, the government entities will look to exercise rights to avoid dilution, and therefore could account for just under BRL8bn of the issue. That would leave approximately BRL2.1bn in primary shares to be placed with public investors. In addition, government entities plan to jointly reduce collective holdings by 5%, placing those secondary shares with the public, resulting in another BRL4bn units being distributed, says the official. BdB has not yet begun to select banks, though it is certain BdB BI, its investment bank unit, will have a lead role. BTG Pactual, which has worked with the bank in the past and is currently advising it on its insurance sector holdings, will also likely have a role. The lead group will probably include at least 3 others, given the size.
CSN Defies Critics, Pursues Cimpor
CSN is moving ahead with its attempt to acquire Portugal’s Cimpor despite calls from investors and analysts to desist and a resounding rejection of the offer form the Portuguese cement company’s board. The Brazilian steel and iron ore specialist officially filed an offering memorandum to Cimpor investors to acquire up to all of Cimpor’s 672m shares at EUR5.75 a unit, valuing the company’s total equity at EUR3.86bn, says CSN. In December, the company stated its intention to bid for Cimpor and the price it would offer, but did not formally launch a public tender for the shares. CSN says it has offers from banks to finance the acquisition, and bankers away from the process say Bradesco and Banco do Brasil have offered credit lines. In the meantime, Cimpor’s board recommended investors reject the offer, and Brazil’s Camargo Correa proposed a merger of its operations in a deal that would keep control of Cimpor on Portuguese soil. That proposal seemed to run into trouble with Portugal’s CMVM, which requested Camargo refile its offer in conformity with the competitive takeover bidding process or abandon its bid altogether. CSN’s tender offer period goes through February 17. BES is advising CSN. Credit Suisse and BofA-Merrill are advising Camargo and Deutsche is advising Votorantim, which has yet to make a move for Cimpor.
Pemex Arrives Late to Feast
Mexico’s Pemex, needing to borrow some $3.5bn this year, has tapped the debt markets as expected. However, increasingly challenging market conditions meant a $1bn size at a slightly larger concession than the high-quality issuers that got out earlier in January. The BBB/Baa1 2020 bond priced at 98.788 with a 6.000% coupon to yield 6.162%, or UST plus 250bp, the tight end of 250bp-255bp guidance. Demand reached $3bn, according to bankers on the sale, and the bond was trading around flat to reoffer Thursday afternoon, according to traders. Bankers away from the deal and investors spot the new issue premium at 20bp-25bp, and see it at 90bp-100bp wide of the sovereign, while bankers on it spot the concession at 15bp-20bp. “The bonds came out a bit cheap, which surprised me,” says Eduardo Suarez, corporate analyst at RBC Capital Markets. He notes that Pemex’s operational performance is improving, but would only be reflected gradually in financial results. A participating EM investor agrees it was “reasonably cheap,” noting the yield was not as tight as some high-grade issues earlier this month, likely due to a general widening in markets. Mexico priced a 2020 January 11 to yield 5.250%, or UST plus 142.4bp, a new issue premium below 10bp. “We had the wind at our backs as the market opened, but the equity markets turned during the day. Taking that into account, I think it did well,” says a banker managing the sale. “The issuer did all the right things, but the market may have turned on them a bit,” adds a DCM banker away from the deal. He notes a general preoccupation with earnings numbers, the Greek debt scare, Obama’s bank attack and other news that sapped risk appetite. Some 266 accounts participated in Pemex, according to a banker on the deal, with about 45% coming from the US, 35% from Europe and 20% from LatAm, Asia, and other regions. Barclays, Citi, and Credit Suisse managed the sale. Pemex is also currently roadshowing a 5 and 10-year local bond issue expected at
Capital Inflows Seen Jumping 30%
Net private inflows to LatAm are expected to leap 30% this year to $176.5bn from $135.7bn in 2009, according to the Institute of International Finance (IIF). This includes $85.0bn net direct investment and $37.4bn from portfolios. “Net inflows of foreign direct investment should rebound from a depressed level in 2009 and net borrowing from banks should resume (in part driven by the recovery in trade flows),” says the IIF in a report on EM flows. It expects a slight reduction, to $172.5bn in 2011. The forecasts are included in an updated outlook on EM, including a prediction of $722bn flows overall, an upwards revision of $50bn since October and a 66% year-on-year rise. The IIF anticipates a major upswing from last year’s trough, describing it as the fourth such move in capital flows to EM since such investing came back into fashion in the middle of the 1970s. “It seems most likely that the bias of new flows will be towards large emerging economies with a significant scope to expand a domestic consumer market, especially Brazil, China and India,” says the IIF. The sell-side group expects 4.7% expansion in LatAm GDP this year, following a 2.3% contraction in 2009, and 3.7% growth in 2011. This is more than the global 3.2% and 2.9% GDP growth average expected this year and next, respectively. The IIF expects a 5.8% jump from Brazil this year and 4.0% expansion in 2011.
AIG Fund Manager Moves to Rohatyn
Claudia Arango, who was until recently senior vice president at AIG Capital Partners, has been appointed a senior member of The Rohatyn Group’s LatAm private equity practice. She joined the shop last week. The Rohatyn Group, based in New York, is a global asset management company focused on investing in EM.
Brazil Sticks on Rates, As Expected
As expected, Brazil’s central bank has kept its monetary policy rate on hold at 8.75%, but may begin tightening soon. “We believe that . . . Copom is preparing the markets for a tightening cycle in April,” says Goldman Sachs. The shop adds that Copom will raise the rate by 375bp to 12.50% this year. “The first hike would amount to 50bp in April, followed by 3 increases of 75bp per meeting, concluding with two final hikes of 50bp per meeting,” says Goldman. Bulltick meanwhile believes Brazil may tighten 150bp by the end of the year, starting in Q2. Standard Chartered sees a first hike of 50bp in March.