Category: Brazil

Equity International, founded by Sam Zell and Gary Garrabrant, have acquired 3.3m ADRs equivalent to 6.6m shares, in Brazilian real estate developer Gafisa, the target announced. The amount of shares acquired represents about 5% of the company’s outstanding shares. Equity International made the purchase via its Delaware-incorporated Fund IV Pronto, established in January. The fund is worth about $500m and dedicated to real estate-related investment outside of the US. Investors include university endowments, pension plans, insurance companies, family foundations and private investors.

Following the recent drop in LatAm currencies, Merrill Lynch revises downward its forecast for the end of the year. In December, Merrill Lynch expects the BRL to be valued at BRL1.90 per US dollar, down from its previous expectation of BRL1.70; the CLP at 580, down from 500; the COP at 2,150 from 2,000; and the MXP at 11.75, from 10.60. The bank says the drop in these currencies is mainly explained by the FX derivative structures held by corporates. On the bright side, the new forecasts for December reflect some strengthening in currencies compared to values yesterday. As of press time, the BRL stood at 2.12, the CLP at 634.95, the COP at 2,250.5, and the MXP at 13.2.

Rumors that Eduardo Centola, head of Goldman Sachs Brazil, has been asked to leave the firm are false, say senior officials close to the situation. Local market chatter suggesting Centola and Ana Cabral, head of ECM Brazil, were removed from day-to-day operations at the firm in a first step towards having them leave has recently surfaced. This led market participants at competing firms to infer Goldman is pulling back from a country it claims as a long term priority, as part of its own BRIC theory. A local Goldman official tells LatinFinance both Centola and Cabral have not left the firm, and adds that the rumors are fabricated. Goldman spokesman Michael Duvally declines to comment on talk regarding individual employees, providing a generic statement regarding the bank’s view on the region: “In building out our platform in Brazil and around the region, Goldman Sachs has taken a long term view. We are committed to Latin America and expect continued growth in business opportunities.” This leaves in doubt whether Goldman may in the short term choose to trim its cost structure in Brazil, where investment banking activity has nosedived. A Goldman official who asked not to be identified says the firm is working on adding to its staff, though a locally-based person familiar with the firm says two mid-level executives were let go Tuesday. Goldman declines to comment on or confirm mid-level departures.

Brazilian mining concern Vale issued a statement Tuesday denying rumors that it is in talks or has any plans to acquire Xstrata, the Swiss-headquartered global miner it attempted to buy earlier this year for an estimated $90bn. Loans markets bankers note that the value would be significantly less than that this time – some estimate it would cost under $20bn – and that Vale’s $14bn cash warchest would cover a lot of the financing. The balance should be available short term in these markets, though some lenders might question the credit, given a recent slump in commodities. Vale attempted in March what would have been LatAm’s biggest takeover ever recorded and succeeded in clinching some $50bn in loan commitments for the deal, but was not able to convince Glencore, Xstrata’s lead shareholder, to sell. The two companies apparently could not agree on marketing rights for certain critical minerals with Glencore heard demanding the right to sell iron ore to third parties and Vale insisting it would not give up its existing bilateral relationships with its clients. The collapse of the talks in April dealt a major blow to investment bankers and syndicated lenders in the region who were heard to be eligible for a collective $100m in fees related to advisory and balance sheet deployment if the deal had gone through. This time round, the stakes are much lower, but Glencore may again opt to block a deal, particularly at such a compressed price.

Itau has formed a partnership with department store chain Marisa to provide financial services for Marisa’s clients, it says, in which it will invest up to BRL120m. The 10-year agreement calls for Itau to offer financing products including a jointly-branded credit card. Itau and Marisa will divide the profits from the partnership equally. Marisa saw BRL1.8bn in revenue last year from its 207 stores in Brazil.

Merrill Lynch says Brazil’s central bank should leave the Selic benchmark rate unchanged at 13.75%. The shop also revises downward its expectations for 2009 GDP growth in the country from 3.8% to 3.0%. “The strong initial effects of the credit crunch in Brazil . . . point to a greater-than-required hit on credit and domestic demand in 2009, directly impacting the inflation scenario,” Merrill says. Rate cuts should start coming in the third quarter of 2009 when the rate should go down to 12.75% and 12.25% in the fourth quarter of 2009, the bank forecasts.

Brazilian generator Duke Energy International Geracao Paranapanema and mobile-phone operator Vivo have carried through with financing plans despite tough credit conditions this month. Geracao Paranapanema launched BRL340m in two series of debentures. A BRL249.76m 2013 series pays the DI rate plus 2.15%, and a BRL91.13m 2015 series pays 11.60%. Proceeds from the transaction rated Aa3/AA- on a national scale will be used to prepay remaining debt from a 2013 loan. Citi and Itau managed the sale, which the issuer had upsized from BRL300m. Separately, Vivo has started an issue of BRL550m in 180-day promissory notes, a market that has become more widely used this year as the cost of duration has increased. The notes pay 115% of DI. Proceeds will repay older 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.

The US Department of Justice says it has filed suit in Chicago against Brazilian meatpacker JBS to block its proposed purchase of Kansas City-based National Beef Packing Company. The DOJ claims the acquisition – JBS’ third in the US since 2007 – would “complete a fundamental restructuring” of the beef industry in the US, resulting in higher prices for consumers. It also alleges that it violates anti-trust law. JBS agreed to acquire National Beef in March for $970m. At the same time it bought Smithfield Beef for $585m, a transaction which the DOJ has decided not to challenge. JBS entered the US in 2007, through purchasing Colorado-based Swift for $1.46bn.

The Brazilian government has cleared the way for Telemar Participacoes’ BRL5.86bn takeover of Brasil Telecom. Telecom regulator Anatel approved changes to regulations at a meeting in Brasilia that end a prohibition on the controlling shareholders of Brazilian telephone companies from owning a phone carrier in another region of the country, on which the deal hinged. Telemar has issued BRL4.3bn in 8-year CCB bank notes at DI plus 180bp, and placed BRL3.6bn in 1-year paper at DI plus 160bp to fund the purchase. It was last heard looking at the Brazilian loan market to complete the financing, after pulling a $1.5bn bond in September.

Brazilian steel company and aspiring iron ore exporter CSN has agreed to sell a 40% stake in Namisa, an iron ore mining complex, for $3.12bn, valuing the entire project at $7.8bn. The price tag, object of much speculation throughout the past six months, seems to initially suggest a favorable outcome for CSN. A senior executive at CSN tells LatinFinance he is very pleased with the valuation, but declines to provide details on the nature of the transaction. Halfway through the trading session on Friday the company’s ADR was up over 20% on the news. The process to sell Namisa began in earnest in May, when the company said it hired Goldman Sachs to advise it on the deal. CSN executives suggested at the time the asset could be worth up to $11bn; though some analysts said they didn’t think the asset was worth more than $6bn. Bankers eyeing the auction from a distance speculated the top bid would not be greater than $8.5bn. The winning consortium is made up of Itochu, Nippon Steel – which owns a 22% stake in Usiminas – JFE Steel, Korea’s Posco, Sumitomo Metal Industries, Kobe Steel and Nisshin Steel.