Category: M&A

Brazilian steelmaker Gerdau has clinched participation from 12 banks for its $2.75bn acquisition financing and will today launch the deal to general syndication with a meeting in New York, followed by one in São Paulo Wednesday. In addition to bookrunners JPMorgan, HSBC and ABN AMRO, nine have joined as MLAs with $300m tickets apiece: BBVA, Standard Chartered, Tokyo Mitsubishi, Sumitomo, Mizuho, BofA, Itaú, Banco do Brasil and WestLB. The loan includes a 5-year trade related piece at Libor plus 100bp, a 6-year trade piece at Libor plus 125bp and a 5-year working capital facility at the same spread. The transaction is described by loan market participants as highly successful, considering it is the first to be launched following the August credit meltdown. Pricing was attractive enough to draw in a decent number of banks, and all 12 participants can expect to be reduced significantly. Gerdau is using proceeds to buy Chaparral Steel in the US.

Marfrig’s Mercosur expansion is positive for the credit outlook, according to Moody’s. “Although these acquisitions present integration challenges , they are positive for the rating to the extent that geographic diversification of raw material sourcing increases and the potential impact of closure of export markets due to animal disease decreases,” says Moody’s analyst Soummo Mukherjee. Brazil’s Marfrig is offering $267m for a 70.51% piece of Argentine meatpacker Quickfood, which also has operations in Uruguay. Quickfood exports to LatAm, Europe, Asia and the Caribbean. Moody’s affirmed the B1 ratings and stable outlook and notes that the exact financing of the transaction has not yet been finalized. However, at the end of June 30, Marfrig had a cash and cash equivalent balance of BRL987m and an undrawn committed facility of USD100m to cover the company’s short-term debt of BRL112m, working capital needs and growth investments, including capital expenditures and strategic acquisitions. “The current B1 rating and stable outlook assumes that Marfrig will preserve its comfortable liquidity cushion and maintain debt to Ebitda below 4.0x according to Moody’s definitions. Marfrig’s debt to Ebitda was 3.6x for the last 12 months ending in June 30,” says the agency.

Colombia’s Bancolombia Monday reiterated its view of the merger that created it, amid continued investigation into alleged irregularities. “Bancolombia reaffirms its view that the acquisition process of Banco de Colombia by BIC and the subsequent merger of these two entities were conducted in accordance with international customary standards and practices for this type of transaction and in accordance with Colombian law,” says the bank. “This acquisition process was validated at the time by the respective Colombian authorities,” it adds. The investigation focuses on an alleged unlawful approval of a transaction by the board of directors of the Central Bank of Colombia and the board of directors and the president of Banco Industrial Colombiano (BIC) during the acquisition of Banco de Colombia and its subsequent merger. Bancolombia local shares fell 1.59% Monday, amid a 1.08% retracement in financial stocks.

Nemak, the Mexican autoparts maker owned by Grupo Alfa, has launched a $640m 5-year term loan to help pay for its acquisition of three European parts companies. The financing, which has a 3-year grace period for principal repayment, will be pay between 65bp-85bp over Libor, based on a leverage grid, according to bankers close to the deal. HSBC, Citi, BBVA and Standard Chartered have joint books and will be looking for participation from an additional four MLAs, say bankers.

ICA and GSIP, the operators of the first FARAC concession and the effective borrowers of $3.7bn in loans for the endeavor, are keeping a tight lid on plans to take out the $3.1bn peso-denominated acquisition facility, currently being syndicated out. Prospective participants cite the takeouts for the 7-year facility as critical information, given the scale and currency of $300m MLA tickets. But people close to the offer say the consortium is wary of committing to a time frame, in part out of fear of convoluting the syndication process. A 7-year hold would be both undesirable for lenders and unlikely, but beyond that it is unclear what the borrowers have in mind.

In the wake of the acquisition, Moody’s changed the rating outlook on Scotiabank Sud Americano to positive from stable. It has a financial strength rating of D+, long-term local currency deposits of A2 and the local currency senior debt is rated A2. “The acquisition of Desarrollo enhances Scotiabank’s franchise value in Chile,” says Moody’s. “Although the transaction will materially impact Scotiabank’s capital ratios, those ratios will remain within expectations at its current bank financial strength rating,” it adds. The acquisition will increase Scotia’s Chile deposit market share to 5% from 2% and almost tripling its branch network and enhance its earnings stability. “Presently, [Scotia Chile’s] franchise is weighted towards corporate banking and its earnings are low, on a risk-adjusted basis, due to a lack of business line diversification and poor efficiency,” says Moody’s. Desarrollo’s portfolio of loans to mid-sized companies and consumers will help diversify and make more granular the asset base, thereby, improving earnings stability, adds the agency.