Brazil’s Sabesp has completed a BRL220m issue of non-convertible debentures. A BRL100m 2013 tranche paying the DI rate plus % was acquired by 13 investors. The second BRL220m 2015 tranche pays 12.87%, and was bought by 12 accounts. Pension funds, investment funds and brokers were among the buyers. Proceeds from the sale will pay down some BRL300m in maturities approaching in March. HSBC led the deal rated A+ on a national scale, with Citi, Caixa Economica Federal and Banco do Brasil as co-managers.
Category: Daily Brief
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IDB, Banobras Lend to Mexico Infrastructure
The IDB has approved a loan of $350m for Mexican infrastructure and public services projects, the first from a $1.2bn line of credit. Funds will be disbursed through development bank Banobras to Mexican state and municipal governments and public service providers to finance priority investments in infrastructure, public services and strengthening institutions. The $350m loan is for 20 years, with a 5-year grace period and an undisclosed Libor-based interest rate. Banobras will use the IDB funding to supply medium and long-term loans and credit guarantees, as well as technical assistance. In order to finance small-scale projects such as potable water systems, street lighting or road paving in rural municipalities, Banobras will also be able to rediscount its own portfolio using funds from the IDB loan.
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BdB Bags State-Controlled Bank
Banco do Brasil has agreed to acquire Banco do Estado do Piaui, the state bank of Piaui, for BRL81.7m. BB plans to issue 2.93m shares to finance the acquisition, exchanging 1 unit for 4.60 BEP shares, and has called a shareholder meeting for November 28 to seek approval. BEP has BRL330m in assets. Amid a surprising wave of Brazilian bank consolidation in recent weeks, Banco do Brazil is heard negotiating for Sao Paulo state-owned bank Nossa Caixa and a minority stake of up to 49% in Banco Votorantim. BB could be preparing to offer as much as BRL7bn for each, according to industry officials and local press reports.
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Lenders Take Haircut in Selecta Fire Sale
Creditors of Brazilian seed specialist Selecta Sementes stand to take an average haircut of around 38% on roughly $400m worth of debt following its restructuring, say people close to the matter. The private company went into bankruptcy in May following losses stemming from CBOT-traded soy options and two days ago received judicial approval to sell itself to Argentina’s Los Grobo for $55m. Total outstanding debt, which includes several facilities – local, cross-border, secured and unsecured – is being reduced to $250m, says an executive close to the workout who declines to be named. Some lenders are being paid back in full while others are taking reductions. Among the main creditors are Santander, ING, BES Investimento and Credit Suisse, which participated in an $80m secured capex facility to Selecta prior to its implosion, says the executive. The Swiss shop also had a mandate to take Selecta public on the Bovespa, though this was halted when the company ran into trouble. More than 20 other banks are also heard involved. Selecta has recently received an additional $30m line from a bank group to continue building out a seed crushing facility, which is heard paying close to Libor plus 300bp. Selecta hired Rothschild to advise it through the restructuring.
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IDB Lends $45m to Mexico
The IDB has approved a $45m loan to the Mexican government of which the local counterpart will contribute $10.4m from sales tax revenues. The loan has an estimated disbursement period of 54 months and a Libor-based interest rate, the IDB says. The funds, says the bank, will be used to improve the quality of public expenditures through the implementation and consolidation of a new results-based budgeting system.
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MasterCard Sees LatAm Boost
MasterCard has reported a 15.5% hike in LatAm/Caribbean volume to $48bn equivalent for the third quarter, and sees general improvement across the board. “Despite the challenging times facing the global economy, MasterCard’s Latin America and Caribbean region has once again reported double-digit growth,” says Richard Hartzell, president for LatAm/Caribbean at MasterCard. Purchase volume reached $26bn in Q3, up 18.9% on a local currency basis, including purchase volume plus cash volume and includes the impact of balance transfers and convenience checks. The number of MasterCard-branded cards increased 19.3% as of the end of the third quarter of 2008, totaling 110m cards. “Unlike many other industries, the payments industry, particularly in Latin America, is still in very early stages of maturity and we continue to see a rapid uptake of card-based electronic payments,” says Hartzell. “As the secular shift from paper-based payments to electronic payments evolves we remain focused on delivering value to all parties involved in the payments chain,” he adds.
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Vivo Seals Short Paper Sale
Brazilian wireless operator Vivo has completed its BRL550m promissory notes issue. The 180-day notes pay 115% of the DI rate. Vivo, jointly owned by Portugal Telecom and Spain’s Telefonica, will use proceeds to repay short-term debt. Banco do Brasil and HSBC managed the sale. Vivo sold BRL500m in 1-year notes in July at 106.5% of DI, and this month took out a BRL389m 8-year credit facility through the Banco do Nordeste development bank.
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Voto Still Wants Aracruz
Votorantim Group’s paper and pulp unit VCP is still interested in acquiring a 28% stake in Aracruz from shareholder group Arapar. Voto’s IR executives say the talks for the acquisition are still ongoing, despite recent reports the deal had fallen apart. Arapar, which is controlled by the Lorentzen Group, had agreed to sell the stake to VCP, giving it control of the company, for $1.7bn earlier this year, but the deal failed when Aracruz’s stock plummeted as the company posted derivatives-related losses and was subsequently downgraded. The transaction is presumably being hammered own at lower valuations. Credit Suisse is advising Lorentzen and JPMorgan is advising VCP. JPMorgan also agreed to extend a $1.8bn bridge loan to VCP prior to the deal collapsing. The financing has been suspended since then.
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Argie Workout Suspended
The combination of Argentina’s souring economy and the fallout from the government’s pension fund takeover plan make an agreement with holdout creditors proposed earlier this year unlikely in 2008, according to a banker on the deal. Argentina pleased investors in September with talk of a workout plan with holdouts from its 2005 restructuring. The sovereign hired Citi, Barclays and Deutsche Bank to run the talks, which involve renegotiating terms on ARP and USD debt. However, President Kirchner’s plan to nationalize $26bn in private pensions – passed in Argentina’s lower house Friday and headed for the Senate – has jolted the country’s markets, hurt investor sentiment, upending the tenuous stability that had made such talks even a marginal possibility. “The par bonds, which are part of the USD denominated bonds, are trading at 17 [cents on the dollar,]” says one hedge fund investor whose shop has historically bought Argentine bonds. “If I’m holding untendered debt at levels below the 2005 renegotiation, it’s not a good time to come to me with these kinds of talks,” he adds. It is crucial that the workout happen at the same time as Argentina implements its promised Paris Club debt and local liability renegotiation, says the banker. It does not make sense to proceed with only one of those three items, he adds. Argentine watchers say that in mid-October Nestor Kirchner, former president and Cristina’s husband, who is widely believed to hold the reins of power in the country, felt that a deteriorating international environment meant that even if it reconciled itself with markets, Argentina would not be able to raise additional finance. “Nobody knows,” says a banker working with Argentina, asked about what the sovereign will do next.
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Gruma Descends Ratings Scale
S&P said it lowered Gruma’s long-term corporate and perpetual bonds ratings to B+ from BB, and left it on credit watch with negative implications to reflect a perception that leverage will increase and liquidity tighten because of unwinding of derivatives positions. Gruma’s $300m 7.75% perp traded unchanged at 42.0 between October 31 and November 7, according to Credit Suisse. As of September 30, Mexican corn flour and tortilla producer and distributor Gruma had $62m in cash and about $50 million in committed credit lines. Debt maturities total $58m in the fourth quarter of 2008 and approximately $90m in 2009, adds S&P. On October 13, the agency cut Gruma to BB from BBB minus based on a perception that financial policy had become more aggressive, as evidenced by continued use of derivatives. On October 28, Gruma reported mark-to-market losses of $788m on open foreign exchange derivative instruments with several counterparties. In addition, it reported that it had reached agreement to close derivatives positions with the only counterparty entitled to make margin calls. Gruma is expected to pay this settlement by November 25, S&P says. “The current rating incorporates our expectation that the company will achieve a resolution with the other counterparties to close its remaining derivative positions,” it adds.