Brazilian steelmaker Gerdau has renegotiated leverage covenants on $3.7bn worth of bank loans, according to Monday filing with the CVM. The change will cost Gerdau between $20m-$60m, it says. The outlay will presumably go towards paying amendment fees and higher margins on the facilities to reflect increased risk to banks. Gerdau was heard to have paid banks an amendment fee of 25bp. Two of its recent dollar facilities were launched last year paying 125bp and 150bp. The covenant renegotiation involved more than 40 banks, says Gerdau. A recent drop in economic activity has hurt the steel sector, which analysts and executives say was already long overdue for a cyclical downturn following years of rising prices. Gerdau’s leverage covenants now state net debt to Ebitda must be below 5.0x, compared to a previous gross debt to Ebitda ratio of under 4.0x. It now must also have a Ebitda to net interest expense ratio higher than 2.5x, compared to the previous Ebitda to interest expense ratio floor of 3.0x. Finally, maximum consolidated gross debt must not exceed $11.0bn. Gerdau says it expects its revenues to stabilize by 2010, which will allow the company to reestablish its prior loan covenants.
Category: Bonds
Guatemala Gets $22m from IDB
The IDB has approved a $22m loan for Guatemala so the country may bolster its network of protected areas. Protected areas and national parks cover 31 of the national territory, the IDB says. The IDB loan is made up of a $17.6m loan for 30 years, with a 6-year grace period, and a $4.4m loan for 40 years, with a 40-year grace period.
IDB Approves Opportunity Funds for Mexico
The IDB has approved a $600m loan for Mexico under the Oportunidades program, which offers conditional cash transfers. The loan aims to help fight poverty. Mexico’s department of social development will carry out the program. The loan was granted for a 25-year term, at a spread to Libor.
EM Bonds on Winning Streak
On the week ended June 10 EM Bond Funds “managed to extend their winning streak, the longest since Q3 07, as investors committed another $102m despite Latvia’s woe and the “haircut” Ecuador has imposed on holders of its sovereign debt,” says EPFR Global. As for performance, EM debt funds were up 0.20% on the week ended June 11 while other world income funds’ performance weakened, Lipper data reveals. Global income funds were down 0.18% and international income funds dropped 0.60%.
Citi Vet Resurfaces in Asset Management
Former Citi LatAm banker John Hartzell has resurfaced as managing partner at Milton Point Capital, a US-based investment manager. The former Citi LatAm DCM co-head left the firm last year after almost 15 years of service. Hartzell departed the DCM group in early 2007 to head LatAm trading at Citi and was latterly involved in finding derivatives solutions for corporate clients in the region. Hartzell declines to comment on his move to the buyside.
Paraguay to Get $100m 20-Year
The IDB has approved a $100m loan for Paraguay. The loan, says the IDB, will allow Paraguay to boost its institutional capacity in the public sector through the modernization of different public expenditure management processes and systems. The loan is for 20 years, with a five-year grace period, and carries a Libor-based rate.
IDB Expands Concessionary Funds
The IDB has increased the amount of concessionary funds available for Bolivia, Guyana, Honduras and Nicaragua to $485m per year in 2009 and 2010 from $349m annually in 2007 and 2008. Bolivia will be able to increase its borrowing from the IDB to $157.4m from $113.2m yearly. Honduras will be able to borrow $165.7m yearly during this period, up from a previously approved limit of $119.2m. For Nicaragua, the limit will rise to $133.5m from $96.0m, and Guyana will be able to borrow up to $28.6m, from $20.6m.The loans should allow the countries to overcome the effects of the global economic crisis, says the bank. Resources for the loans will come from the IDB’s ordinary capital and its fund for special operations.
Corrections: Itau Chile/Bimbo Peso Benchmark
June 3 Daily Brief “Itau Chile Readies Local Bonds” incorrectly states the lead manager on Itau Chile’s domestic bond transaction. Itau Chile is managing the sale, rated AA minus on a national scale. Separately, June 3 Daily Brief “Bimbo Edges Closer to Peso Benchmark” incorrectly attributes the rating on Bimbo’s upcoming domestic bond transaction. Moody’s rates the transaction Aa2.
MRV Plans Follow-On
MRV, the Brazilian low-income residential real estate developer, plans to issue up to BRL550m in shares, according to a statement filed with the CVM. The company is planning between BRL250-BRL450m in new shares, and BRL70m-BRL100m in secondary securities. The offering will represent 10%-12% of the company’s total capitalization and Credit Suisse and UBS Pactual are leading, says MRV. “This news reinforces our view that growth expectations are improving and probably much faster than expected,” says JPMorgan. “We estimated that MRV would be [free cashflow] positive next year, and with leverage at only 24% in Q1 we believe that it is quite early to raise equity now, so we would need more information from the company to understand its plans for this money,” it adds. In the month through May 29, MRV shares rose 46%, topping the list of performance for listed real estate companies in the region, says JPMorgan. The shares close Tuesday at BRL24.20, down 7.3%, much steeper than the 0.9% retracement in the Bovespa. The company’s July 2007 IPO priced at BRL26.00. In April, MRV approved a sale of BRL200m in long and short-term debt. Half the amount is set to come in 3-month promissory notes, with the remainder in 2011 debentures. Both are set to price at DI plus 3.7%, says MRV.
Rede Offers to Buy Back Perps
Rede Energia has launched a cash tender offer for its 11.125% perpetual bonds. The Brazilian power distributor can purchase up to BRL300m-equivalent in dollars through the offer expiring June 26. Accepting holders are set to receive $400 per $1,000 tendered, plus a clearing premium of up to $80 to be determined through a modified Dutch auction. Holders tendering before June 12 will receive an extra $50 per $1,000 principal. Bank of America and Planner Securities are dealer-managers. Rede plans to fund the buyback using proceeds from an upcoming issue of BRL320m in 1-year promissory notes expected to pay 120% of DI. Rede sold $575m of the perpetual bonds in 2007 via Merrill Lynch. There are currently $400m outstanding, trading recently at 33-35, according to data from Credit Suisse.