Following last week’s acquisition, Braskem is considering reprofiling Quattor’s debt with a dollar bond issue later this year, CFO Carlos Fadigas tells LatinFinance. Braskem has a leverage ratio of 2.7x and its debt load, including dollar-denominated bonds and loans, has an average maturity of close to 7 years. By contrast, Unipar debt is exclusively held by local banks, with no bonds or debentures, and a leverage ratio of over 10x prior to acquisition, says Fadigas. Braskem is buying, along with other assets, Unipar’s 60% stake in Quattor for BRL870m and assuming BRL6.7bn in net debt. Added to Braskem’s obligations, the merged company’s net debt is BRL13.2bn says Fadigas. Estimated Ebitda is around BRL3bn, leaving the combined entity with a leverage ratio of 2.7x-3.0x. This assumes Braskem raises BRL4bn-BRL5bn in an upcoming capitalization from existing shareholders, including Petrobras and Odebrecht. The pair committed BRL3.5bn and minority holders may purchase up to an additional BRL1.5bn in Braskem stock. The equity capital raising process is likely to take up to 90 days, says the CFO. Fadigas says Braskem’s outstanding 10-year notes are trading to yield close to 6.6%, which he sees as attractive and a good target for a new bond. Still, he notes, with over BRL8bn in cash following the capitalizations, the combined entity will have plenty of breathing room to meet its obligations without issuing bonds. Moody’s affirmed Braskem’s Ba1 rating and stable outlook Friday, noting that the acquisition of Quattor is accretive. Moody’s spots initial leverage of the combined entity at 3.2x, dropping to 3.0x this year. Fadigas says Braskem plans to meet Quattor’s Brazilian lenders – many of them the same as Braskem’s banks, including Banco do Brasil and Bradesco – to discuss a debt re-profiling. For the acquisition, Braskem used Morgan Stanley and Bradesco BBI. Unipar hired Estater and Petrobras hired BTG Pactual.
Category: Daily Brief
London Pacific Buys Into Brazil Healthcare
LP Healthcare Group (LPHC), a joint venture between US-based investment firms London Pacific and Incite Financial, have agreed to acquire Brazil’s Santos Administracao e Participacoes for $50m cash. Santos is a healthcare system that owns an HMO and a 57% stake in 3 hospitals and 3 clinics. The HMO has 125,000 beneficiaries, London Pacific senior MD Michael Low tells LatinFinance. London Pacific owns 30% of LPHC and Incite the remaining 70%. Closing of the acquisition is expected in Q1. LPHC intends to keep Santos’ current management in place. Santos, founded 53 years ago, generated approximately $173m in revenue and $23m in Ebitdar for the year ended December 31, says LPHC. Low also says this deal, which was privately negotiated, is his firm’s first foray into LatAm and that while there are no concrete plans to expand in the region yet, LPHC will look at any opportunities that may arise.
Barclays Changes BRL Forecasts
Barclays says that in light of the recent surprisingly rapid deterioration of fundamental support, and the potential for election pressure, it has changed its USD/BRL forecasts to BRL1.75 in 1 month (previously BRL1.70), BRL1.80 in 3 months (previously BRL1.70), 1.90 in 6 months (previously BRL1.75). It keeps its 12-month forecast unchanged at BRL1.75. The shop adds that December’s employment report reinforces the notion that growth is set to moderate in the coming months. Meanwhile, it says, the current account surprised in December with an almost $6.0bn deficit (versus the $3.6bn deficit expected by consensus), which should be repeated in January. Barclays thinks the current account deficit will rise to around $50bn-$70bn in 2010-11 versus $36bn or so in 2009.
Moody’s Positive on Coca-Cola Femsa
Moody’s has changed the outlook for Coca-Cola Femsa (KOF) to positive from stable, citing the Mexican company’s ample free cash flow generation, solid performance and debt reduction efforts over the past several quarters despite very challenging economic conditions. For 2010, Moody’s expects KOF to maintain free cashflow close to recent levels of around MXP5bn to MXP6bn (when normalized for working capital), which should allow for further de-leveraging. In 2008, Venezuela accounted for 18% of KOF’s revenues and 9% of its operating income. As of September 30, KOF reported gross debt of MXP15.7bn, down MXP2.9bn or 16% from year-end 2008. Net debt was MXP6.7bn, down by nearly half since year-end 2008. Moody’s adds that devaluation of the official Venezuelan exchange rate to 4.30 from 2.15 VEF/USD will not materially affect KOF’s credit metrics given Venezuela’s limited contribution to cash generation. Moody’s expects that KOF will continue to grow earnings and generate ample free cashflow in 2010 despite a still-challenged consumer, allowing it to further reduce debt and improve credit metrics.
Santander Registers Bond Sale
The Chilean unit of Spain’s Banco Santander has registered a 2014 UF3m ($127m) non-convertible bond issue with the local banking regulator. The AAA-rated bonds will pay 3.3%. Proceeds will be used to finance the bank’s mortgage loan portfolio, says a Santander spokesman. The Chilean bank itself is managing the sale, he adds.
MRS Approves Bond Issue
Shareholders in Brazil railroad company MRS Logistica have approved a BRL300m non-convertible debenture issue maturing in 2020. The bonds will pay 1.5% over the DI rate. Banco Bradesco will manage the issue. MRS runs the Southeastern Federal Railroad Network, which connects the states of Minas Gerais, Rio de Janeiro, and Sao Paulo. Its major shareholders are steel producer CSN and iron ore producer MBR.
Developer Gets Credit Line
Brazilian real estate developer Helbor Empreendimentos has signed a BRL1.5bn credit facility with Bradesco, it says. Helbor will use the loan to borrow to fund projects, according to an investor relations official. It will pay TR plus 10.5%-11.5%, depending on use of proceeds. The Sao Paulo-based developer of commercial and residential properties operates in 9 Brazilian states and held an IPO in 2007.
CorpGroup Grabs VTR Stake
A unit of Chile’s CorpGroup has acquired a 20% stake in telecom company VTR GlobalCom for CLP167bn ($333m) to be paid in cash in May, says Cristalchile, the seller. The sale will result in a profit of about CLP68bn, it adds. CorpGroup is a financial conglomerate controlled by Chilean businessman Alvaro Saieh. US-based Liberty Global, which controls 80% of VTR, last year offered to acquire the 20% stake for about $260m in cash or stocks. Local investment bank Celfin Capital had offered $323m. Both offers expired in November.
Minerva Talks Low 11s
Price expectations on a new $250m 2020 NC5 bond from beef producer Minerva is in the low 11% area, according to investors following the deal. The B3/B Brazilian meatpacker was heard surpassing $600m in orders Thursday, and could price as soon as today. Such a yield may prove attractive to investors seeing overall tightening yields in the Brazilian corporate space, says a European EM investor, if they can get comfortable with 5x-plus leverage. Proceeds from the sale are earmarked for refinancing 2010 and 2011 maturities. Goldman Sachs and Banco do Brasil are managing the transaction.
Brasil Soy Farmer Preps Bond
The Brazilian high-yield parade shows no sign of slowing, with yet another food producer joining the queue. Soy and Cotton grower Vanguarda do Brasil is preparing a debut $200m 2015 bond, according to the 3 main ratings agencies, which assign B1 and B minus grades. Morgan Stanley is managing the sale, an official at the company says, declining to offer further details. The proceeds will be used to repay working capital loans and other short-term debt, according to Moody’s. “The ratings on Vanguarda reflect the company’s aggressive financial profile, which arises from its weak liquidity and corporate governance issues, relative weak cash flow; and significant refinancing needs,” S&P says. It adds that risks are mitigated by an experienced management team, product differentiation and comparatively stable profitability. Based in the state of Mato Grosso, Vanguarda has been owned and operated by controlling shareholder Otaviano Pivetta for 27 years.