BTG Pactual plans to meet fixed-income investors this week in Europe and the US, testing the market for dollar-denominated issuance at the same time the bank is separately considering Colombian peso-denominated debt. The Brazilian bank’s roadshow, officially non-deal, begins in London and Boston on Wednesday, followed by New York and Los Angeles Thursday. BTG last visited the bond market last year, pricing a $500m 2016 bond which was trading to yield at 3.75% as of Monday, according to traders. Bradesco, BTG Pactual, Citi and Deutsche Bank are managing the process. The bank was also rated last week for 5-year COP-denominated bonds. BTG, Celfin Capital and Deutsche are handling that process, which could result in the first COP-denominated deal for a Brazilian issuer.
Category: Bonds
CFE Nears MXP Sale
CFE is planning to issue up to MXP17bn ($1.3bn) in Mexico’s domestic bond market on Thursday. The expected pricing date was originally Wednesday. The 30-year fixed-rate transaction has a 15-year average life, according to market participants. The proceeds will be used to finance expenses related to the La Yesca hydroelectric power project. Banamex, BBVA Bancomer and Santander are managing the transaction, rated AAA on a national scale.
Elektro Wraps up Debentures
Brazilian utility Elektro has finalized the sale of up to BRL650m ($320m) in domestic bonds, according to Anbima. A 2017 tranche pays the DI+0.74%, coming inside of a 0.78% ceiling, and amortizes in two equal installments during the final two years. A 2019 inflation-linked series pays 5.1%, inside a 5.7% ceiling, and amortizes in two equal installments during the final two years. A third 2022 inflation-linked tranche pays up to 5.5%, inside of a 6.0% ceiling and amortizes in three equal installments during the final three years. The unit of Spain’s Iberdrola plans to use proceeds for repaying debt. Banco do Brasil and HSBC managed the sale, done under the rule 476 restricted format.
FPSO Aims for Bond Market
A Brazilian unit of SBM offshore is preparing a $500m bond transaction to finance a floating production, storage and offloading vessel (FPSO), according to a Fitch presale report, in what bankers say could be the first deal of its kind in LatAm. The 15-year bonds to be sold in the RegD market are secured by revenues from an 18-year contract between Petrobras and the Cidade de Anchieta vessel, which initiated production Monday. Proceeds from the issuance, rated BBB and to be done through the SBM Baleia Azul unit, will largely be used to repay SBM for most costs of refurbishment, according to Fitch. Noteholders will be assigned a collateral package that includes a pledge of the shares of the issuer and owner of the vessel, as well as a mortgage on the FPSO. “The market conditions should be supportive for this type of deal,” says a banker away from the transaction. The transaction would be similar in structure to Brazilian drillship financings including a $1.5bn 2021 bond from Odebrecht done last year, though bankers away from the transaction say it is the first time this type of structure would be used for an FPSO, an asset class more familiar to the loan market. OSX raised a $500m 3-year bond in March to help fund construction of an FPSO. This year also saw the region’s first wind energy project funded in the bond market, with Acciona raising $298m in 2031 bonds for projects in Mexico.
Locamerica Completes Local Bonds
Locamerica has put the final touches on a BRL200m ($99m) sale in Brazil’s domestic bond market, according to Anbima. The car rental agency’s 2018 debenture pays DI+2.25%, in line with a target set at announcement, and amortizes in equal annual installments beginning in 2013. It is raising funds to improve its maturity profile and for working capital. Itau managed the transaction, done under the rule 476 restricted format. Locamerica is rated A minus on a national scale, and raised BRL314m in an IPO earlier this year.
Paraguay to Engage Buyside
Paraguay is taking advantage of supportive market conditions to meet bond investors during a 2-day roadshow this week, according to investors familiar with the plans. The sovereign is scheduled to visit fixed-income accounts in New York Thursday and Boston Friday. Citi is managing the process. The sovereign has been aiming to return to the international bond markets, with government officials having told LatinFinance that an issue is a long-term goal, though the government is not in urgent need of funds. The government has also said it would also prefer to wait until receiving an investment-grade rating. Paraguay is rated B1/BB minus. The country’s banks have recently approached the bond markets. Banco Continental Paraguay priced a $200m 8.875% 2017 bond in June to some $450m in demand, though decided not to settle the deal after the impeachment of President Fernando Lugo worried the market. In 2011, BBVA Paraguay sold a $100m 3-year bond at a 9.75% yield. The region’s sovereigns have seen well-bid sales this month, with Colombia raising $559m-equivalent in peso-denominated bonds last week and Brazil selling $2.5bn in 2023 bonds. Also, Chile has registered a debt shelf of up to $1.7bn, according to the SEC, though there were no details regarding a specific upcoming transaction. Proceeds are earmarked for the sovereign’s general budget purposes. Chile last issued in the cross-border markets in September 2011, selling $1bn in 2021 bonds and $350m-equivalent in reopened peso-denominated 2020 bonds, through Deutsche Bank and HSBC.
Pine Plots LF Offering
Brazil’s Banco Pine is preparing to issue BRL300m ($148m) in letras financieras (LF) in Brazil’s domestic debt market, it says. The issue comes under a BRL1bn program. It does not offer information regarding the timng of the sale, which awaits regulatory approval. BTG Pactual, Santander and Pine Investimentos are managing the sale. Pine is rated A+ on a national scale. The bank is also considering the sale of bonds in Chile’s domestic market, having met with investors and registered a UF6m ($282m) program of up to 10 years with JPMorgan and Celfin.
Rule Change Seen Benefitting Mid-Size Banks
Measures announced by Brazil’s Central Bank lowering banks’ reserve requirements should benefit the country’s mid-sized banks, Barclays says. “In our view, this decision was taken by BCB to primarily make sure liquidity conditions remain intact for smaller banks post the announcement of the liquidation of Cruzeiro do Sul,” the shop says. The Central Bank is incentivizing Brazil’s large-cap banks to use funds freed up under the changes to direct resources to either buy loan portfolios or Letras Financeiras from smaller banks. SME-focused mid-sized banks such as ABC Brasil, Bicbanco and Daycoval should be the ultimate beneficiaries of these measures, Barclays says, given their sound credit risk profiles, allowing them to extend their funding terms at the same time as lowering funding costs. Banks in lending JVs with larger banks, such as BMG and Banco Votoratim could also benefit, either from the sale of a portion of their loan portfolios to their partners or from additional funding. Brazil’s Central Bank announced Friday a reduction in the additional reserve requirements for demand deposits – to 0% from 6% – and time deposits – to 11% from 12%. The measures are effective immediately and aim to add as much as BRL30bn ($14.78bn) of additional resources to the banking system.
Telefonica Brasil Defines Domestic Jumbo
Telefonica Brasil has finalized the sale of BRL2bn ($985m) in Brazil’s debenture market, according to Anbima. The 2017 bullet debenture pays the DI+0.75%. The unit of the Spanish telecom and operator of the Vivo brand plans to use about half of the proceeds to pay for spectrum purchased in an Anatel auction last June, and the other half to refinance short term debt, according to Moody’s. Banco do Brasil managed the sale, done under the rule 476 restricted format and rated Baa1 on a national scale. More fundraising is seen ahead in the short-term for the LatAm Telefonica units. The company’s Spanish parent is considering an IPO for its Latin American operations in order to raise additional funds, according to bankers following the situation.
Without Buyer, Cruzeiro do Sul to be Liquidated
Banco Cruzeiro do Sul is to be liquidated, Brazil’s Central Bank says, after the Fundo Garantidor de Credito (FGC) failed to find a buyer for the mid-size lender. The decision puts an end to a process that began with fraud investigations and which the FGC tried to resolve through a 51% haircut on the bank’s dollar bonds and attempt to find a buyer among Brazil’s larger banks. The FGC offer to bondholders expiring last week got 88.7% acceptance, the FGC says, though the tender was contingent on the bank finding a buyer. It had been looking to offer holders cash for $1.58bn in bonds in a process led by Bank of America Merrill Lynch and HSBC. Brazil’s central bank seized Cruzeiro in June after finding “unsubstantiated asset items,” and the bank was under the temporary administration of the FGC during an investigation. The debt default is said to be the region’s biggest since 2002. Banco Prosper, which Cruzeiro agreed to buy last year, is also to be liquidated. About 35% of Banco Crizeiro do Sul’s deposits and 60% of Banco Prosper’s are guaranteed by the FGC.