Category: Brazil

BNDES has approved a BRL1.42bn 8.5-year credit facility for the local unit of Anglo American. Anglo will draw the funds to expand its Barro Alto nickel mine in the state of Goias. The loan will pay a spread over TJLP, a BNDES official tells LatinFinance, declining to specify the exact margin. Anglo plans to spend BRL3.1bn on expanding the mine. Earlier this year, it acquired control of two Brazilian iron ore projects from MMX for BRL5.4bn.

The asset management arms of Brazil’s Bradesco (BRAM) and Japan’s Mitsubishi (MUAM) have raised a BRL370m fund. The so called Saiken Fund is raised among Japanese investors and will invest in Brazilian federal government securities. It will not have any currency protection, and will be benchmarked against the IRF-M, a fixed income index measured by Brazil’s Andima, the financial markets association. BRAM will manage the fund.

Brazil’s largest bank, state-owned Banco do Brasil (BdB) is heard to be in advanced talks to acquire part of Banco Votorantim. Industry executives away from the situation say BdB has offered to acquire a 49% stake in Voto with a bid heard valuing the entire institution at around $6bn. Bradesco is also rumored to be in the running, seeking to purchase 100% of Voto, but the owning family does not want to cede control. Both BdB and Voto decline to comment on the rumored transaction, which is apparently in advanced stages amid strong momentum in Brazilian financial institution M&A. “We’ve made no decision about that,” says a BdB official, adding that his bank does not even admit that it is in talks. Employees at both banks say no internal announcement has been made. Local newspapers reported Sunday that BdB is close to offering some BRL13bn for Voto. A New York-based financial institutions M&A banker says HSBC may also consider a bid for the Brazilian bank. If BdB does acquire Voto, Bradesco stands to fall even further behind in Brazil. While still a very large and well run bank, Brazil’s largest private sector financial institution by assets and market cap is already being dethroned by a merger between Unibanco and Itau, announced last week. Bradesco issued a statement to the CVM Monday saying it has no comment. Votorantim owns Brazil’s largest auto insurance writer, and engages in local fixed income including short-term lending and securitization. Its investment banking unit includes offices in New York and Sao Paulo. BdB’s investment bank employs around 100 people in Rio and Sao Paulo, and has rep offices in New York and London.

Alberto Sansiviero, Santander’s head of Brazil loan syndications based in Sao Paulo, is leaving the firm. His departure is for personal reasons, he tells LatinFinance, adding he will not go to another institution. Two Banco Real bankers who joined Santander as part of the latter’s acquisition of ABN AMRO assets in Brazil will assume his duties. Conrado Lautenberg, will head origination for Brazil, while Ignacio Lorenzo takes syndications. They will lead a group that includes both Santander and Real executives, says Sansiviero.

UBS Pactual has pared down its Brazil investment banking operation to reduce costs. Among the departures are two research analysts who were let go last week, according to an official at the shop. Guilherme Vilazante Castro, responsible for covering small caps and real estate, and Jander Silveira Medeiros, in charge of consumer and retail, were both shown the door. Selective slashing in sales and investment banking at the mid and junior levels is also heard to have taken place. “We lost many people over the past year so instead of laying off, in many cases we’ve decided not to replace the ones who left,” says the executive. There is, however, a difference in caliber between the voluntary departures and the layoffs. UBS Pactual has been the victim of three large scale defections this past year. In the March, investment banking co-head Alexandre Bettamio left for Merrill Lynch taking with him Roderick Greenlees, head of Brazil M&A, director Hans Lin and five others. In May, Andre Esteves, LatAm chairman of UBS and head of fixed income, departed to start a new fund called BTG, taking with him nine senior executives, including New York, London and Zurich-based heads of trading, structured products and DCM staff. Later in June, five wealth management executives at UBS also left the firm, some of which were based in Sao Paulo. UBS is third placed in the region by core investment banking fees, with $105m, or just over 10% of the market, Dealogic data for the year to October 20 shows.

Brazilian Poultry processor Sadia has been downgraded to B1 from Ba3 by Moody’s, and is also reportedly being sued by a US investor for failing to appropriately disclose troublesome hedging positions. The downgrade “is primarily due to the company’s significant increase in leverage, as measured by total debt to Ebitda from 3.7x at the end of Q208 to 6.7x at the end of Q308, due to the increase by 76%, or BRL3.7bn, in total indebtedness in anticipation of cash outflows to cover derivatives exposure,” the agency says. Though it will be challenged in the near term, Moody’s adds that Sadia could gradually reduce its leverage in 2009-2010 by cutting investment and costs, as well as reducing working capital needs. Cash flow should benefit from depreciation in the BRL versus the dollar and other currencies. Separately, a New York shareholder has sued Sadia alleging it failed to disclose currency derivative contracts used, according to wire reports. The Westchester Putnam Counties Heavy & Highway Laborers Local 60 Benefit Funds claims the derivative contracts violated company policy because they were “far larger than necessary,” say wires.

French power generator and transmitter Areva has been awarded a $150m contract by Interconexiones del Sur to build a link between Uruguay and Brazil. The interconnection in Melo, Uruguay, will allow exchange between the two grids, which have different frequencies. Areva expects to have the project online in 2010.

Brazilian miner MMX has acquired rights to mine 1,760 hectares of land in northern Chile. If exercised, the mining rights would cost the company $53.5m. The land, located 50km inland from the northern coast, has deposits of iron ore, which the company’s Chilean subsidiary will seek to mine. Some $26m of the rights have already been exercised and MMX, which is owned by Brazilian entrepreneur Eike Batista, will spend some $17m on a viability study.

Banco do Brasil’s bid to acquire the state of Sao Paulo’s Nossa Caixa has gained substantial momentum after a decision late Tuesday from Brazil’s National Judicial Council. The council ruled in favor of BdB in a dispute with Bradesco to manage billions of reais worth of judicial escrow deposits in the states of Rio de Janeiro and Minas Gerais. Since the ruling sets a precedent for similar decisions down the road, private sector banks are unlikely to be as drawn to Nossa Caixa, whose estimated BRL15bn in judicial escrow deposits account for a substantial portion of total deposits, according to a Goldman Sachs report. “This decision removes an important roadblock from the acquisition process, since it gives Banco do Brasil confidence that it will actually receive the judicial deposits in Nossa Caixa,” says the shop. In Rio, Bradesco would have managed some BRL1.3bn in escrow deposits, according to the CNJ’s official news site. The move is additionally positive for BdB in that it suggests it will continue to have access to a large and stable source of deposits. For Bradesco, the news is negative, as Nossa Caixa falls further out of its reach, leaving it with even fewer options to acquire a sizable target in the near term. Bradesco stands to lose its position as the country’s leading bank by market cap, assets and deposits through the planned union of Unibanco and Itau, which was announced Monday. And opportunities to buy its way up the scale chain are ever more scarce in Brazil. Bradesco is expected to appeal the judicial decision.

Illinois-based food processor and ethanol producer Archer Daniels Midland has teamed up with Grupo Cabrera for a $500m 7-year Brazil ethanol venture. ADM is contributing $370m and aims to generate output of 70m-90m gallons a year of ethanol to meet domestic consumption, in an investment that has been expected for several months. The joint venture will construct two processing plants, each consisting of a sugarcane plantation, a sugar mill, an ethanol distillery and a biomass-powered cogeneration facility to provide power and steam. Each mill – located in Minas Gerais and Goias – will have annual crush capacity of 3m tons. ADM, which was last year rumored to be eyeing investment in the South American country, seeks other biofuels acquisition opportunities in Brazil, especially in distressed assets, according to wire reports of a call with the CEO. Reports of a bid for Cosan also did the rounds mid-2007. ADM has other facilities in Brazil, including a biodiesel plant in Rondonopolis. “Brazil has the ingredients required for sustainable agriculture: abundant arable land, ideal climate, and advanced agricultural technology,” says Grupo Cabrera owner Antonio Cabrera, a former agriculture minister. “Our partnership with ADM reinforces our commitment to the responsible production of renewable energy,” added Cabrera, who reportedly portrayed the deal as a vote of confidence in Brazil at a time of crisis. ADM’s net sales for the fiscal year ended June 30 were $70bn. Other foreign investors are understood to be looking to invest in Brazilian ethanol. A major Middle East-based fund is heard in advanced discussions with Petrobras on a joint venture to be announced soon.