Category: Brazil

Brazilian concessions operator CCR, lead sponsor in the ViaQuatro consortium for the Linha 4 metro line in Sao Paulo, has clinched a $370m long term financing package. Raising funds in these markets is a significant achievement that provides a glimmer of hope for other prospective infrastructure projects. The IDB A/B financing for a 30-year PPP to operate and maintain the line consists of $309m in a first phase and a $60m chunk for the second part. An oversubscribed B loan, albeit raised with a club of banks and not through syndication, allows the IDB to reduce its cash outlay on the 15-year A loan from an originally planned $95.0m to $69.2m. Pricing on the A piece is estimated to be starting in the 275bp over Libor area and moving up to around 320bp, according to a person close to the process. The deal also includes a $240m 12-year B loan, led by the IDB and jointly funded by a club including Santander, SMBC, KfW, Banco Espirito Santo and BBVA as lead arrangers, with SocGen and WestLB as co-lead arrangers. The margin starts at Libor plus 200bp and rises to 250bp over the life of the facility. For a second phase, the IDB has also pledged another $60m A loan, to be disbursed 2 years after commercial operation of the subway. The multilateral claims that the project is the first Brazil PPP to be financed in the international markets. ViaQuatro is led by CCR, Mitsui and Banif. CCR is also preparing to close a similar financing for the Rodoanel ringroad it is building in Sao Paulo – a BRL2.5bn project heard to involve a Farac-style local currency mini-perm with cash sweep.

Brazilian real estate developer Rossi Residencial plans to raise BRL150m through private share placements. Rossi will issue 34.48m shares at BRL4.35 each. Proceeds from the operation will strengthen the developer’s capital structure to support expansion. The controlling shareholders say in a statement that they will acquire any remaining shares after minority holders participate, to guarantee a 100% subscription. The move represents a 17.9% dilution over the last published shareholder base, according to Itau. The transaction eases concerns about the company’s cash needs, Itau says in a note, and offsets some concerns over slower growth in new products. Rossi also announced lower earnings guidance Tuesday, which also help the cash situation by lowering working capital needs, the bank says.

Brazilian car-rental provider Localiza has scrapped plans to issue BRL300m in 2012 debentures, a sale that had already been delayed. The issuer asked last week for the offer to be suspended for 60 days, citing poor market conditions, but has now given up. The issue had been intended as a follow-up to a BRL300m August sale of 2011 bonds priced at the DI rate plus 180bp. Unibanco had been managing the transaction.

Brazilian sugar and ethanol producer Cosan’s 8.75% coupon perpetual traded around 50-55 Monday, according to traders, after changing hands around 75-80 mid-September. Airline Gol is at the 45-50 mark, down from 55-60 two weeks ago. Cosan’s ambitious growth plan amid liquidity concerns has seen its rating lowered one notch to Ba3 by Moody’s Sept 24, while Gol has seen its credit fall two notches this year to B1 as it gets pinched by fuel costs. Both bonds become callable in 2011.

Energias do Brasil plans to buy back up to 5.59m of its shares. The Brazilian power holding company controlled by Energias de Portugal will repurchase the stock today through Friday. Energias do Brasil shares closed at BRL22.47 Monday.

S&P has lowered its long-term corporate credit rating on Brazil-based food producer Sadia, including a subsidiary’s $250m in senior unsecured notes, to BB from B+. It also removed the ratings from CreditWatch, where they had been placed with negative implications last month, but kept the negative outlook. “The downgrade reflects the weakening of the company’s credit metrics after it faced losses in unwinding certain derivative transactions in third-quarter 2008,” says S&P analyst Milena Zaniboni. Losses on these transactions totaled BRL760m.

Brazil’s stock market bore the brunt of the EM exodus Monday, sparked by growing global panic about the state of financial markets, sinking 15% at one point before clawing back some of the losses. The Ibovespa flopped 5.43% Monday to 42,100, well clear of the day’s low at 37,616 but compounding several sessions of significant losses. Trade was stopped twice when the market went into freefall in heavy volume panic selling and commodity and bank stocks were bruised hardest. After all the foreign money piling into Brazil over the last few years, it is inevitable that some exits, but the speed and unruliness of the drop has shocked observers. Mexico, Argentina, Chile, Peru and Colombia also suffered the drag of a 3.58% fall in the Dow to its first close under 10,000 in 4 years. The mood remains highly jittery as fear generally grips financial markets and investors seem EM-averse and happier to hold cash. The BRL meanwhile slipped back further to close at BRL2.20/USD, a new low, while Mexico’s peso slumped to MXP11.83/USD. LatAm generally looks set to mirror the bearish US trend in technical trade, overshooting either way. And the meltdown will keep new issuance at bay for some months. The reversal comes in stark contrast to recent expectations of bankers. At the start of 2008, leading Brazilian equity houses were expecting the IBovespa to end the year at 75,000 or higher, versus 61,000 in early February. Most strategists will be revising their target lower as the index heads towards a 50% retreat from the year’s high above 70,000. Some are hopeful that low LatAm valuations and likely resilient corporate earnings will help LatAm equities bounce back, but few investors will want to try and catch a falling knife.

LatAm sovereign credit ratings will be under increased pressure next year, Moody’s senior economist Mauro Leos says, particularly Brazil, Peru and Colombia – which the agency is keeping a notch below investment grade. “The ratings will be tested next year,” Leos tells a Moody’s panel on LatAm securitization in New York. He adds that they were not really being tested much this year thanks to strong growth and healthy fundamentals. The economist says his shop feels the ratings are robust at the moment, but much will depend on what happens with financial flows, the US recession and commodity prices. Lower rated credits such as Uruguay, Costa Rica and Panama, have ratings that already contemplate volatility, he adds.

The Brazilian government’s National Monetary Council has authorized BNDES to increase the limit of loans it can make to Petrobras. BNDES can now loan up to BRL12bn, after the CMN changed a rule limiting the development bank to loan up to 25% of its assets to a single company. Before the new rule, the federal government was considered a single client of BNDES, and state run companies such as Petrobras were obligated to share the limit. The new rule allowed Petrobras to separately borrow up to the limit of 25% of BNDES assets, which total close to BRL50bn. Petrobras has recently said it can remain comfortably financed through any financial crisis until 2010, using its own funds to finance short-term investments.

BNDES has approved financing of BRL1.5bn for mobile-phone operator TIM Participacoes. The package is split into three 8-year facilities. A BRL490m piece pays TJLP, plus 0.9%, plus an additional undisclosed risk spread assigned to the company. A BRL714m chunk pays TJLP plus 1.8%, plus the risk spread. A third BRL306m tranche, for non-equipment related expenses, pays ICPA plus the risk spread. The line will be used by the company to finance part of its 2009-2013 investment plan.