Category: Brazil

Duke Energy’s Brazilian unit Paranapanema plans to sell BRL341m in debentures, a minor increase from an originally slated BRL300m. The issue is split into a BRL250m 2013 tranche paying the DI rate plus 2.15%, and a BRL91m 2015 piece paying a fixed rate of 11.60%. The company’s board approved the increase in size due to increased demand. Proceeds will be used to repay debt. Citi and Itau managed the sale.

In a rare piece of positive news for the LatAm bank market, Braskem, the Brazilian petrochemicals producer, is heard increasing a 5-year pre-export facility. The deal will likely grow to at least $700m, from an originally targeted $500m, and with no flex on the Libor plus 175bp pricing, say people close to the process. Bankers and company executives are hesitant to celebrate before closing, noting volatile market conditions can lead to last minute pullouts that might push the final figure back down. The transaction, which had been waiting in the wings for months prior to launch in early September, is part of the takeout of a $1.2bn bridge raised last year to acquire competitors Ipiranga and Copesul. Braskem paid down part of the bridge late May with a $500m 2018 bond priced to yield 7.375%. The BB+/Ba1 offer was upsized from a $400m launch and led by ABN, Calyon and Citi. Braskem officials acknowledge that the loan is being wrapped up, but they decline to comment on any change in size. The facility is led by Calyon, Citi and Santander, which inherited the transaction through its acquisition of ABN AMRO’s Brazil unit.

Brazilian steel miner CSN is still in talks with potential bidders regarding a sale of its iron ore mining complex Namisa, say people familiar with the proceedings. The company is studying a handful of binding proposals, apparently including some from Chinese and Japanese consortia. Bankers away from the process estimate that top bids came in at around $8.5bn, more than the $5.0bn-$6.0bn some analysts estimate the asset is worth, but well below the $11bn the company wants. Reduced availability of debt financing for M&A and capex have not had any particularly negative impact on the willingness of bidders to acquire the asset, claims a person close to the seller. The company’s official line on the matter is that there has been no material news on the development, and that there is no set date for conclusion of the sale. But a more cautious environment and the track record of CSN’s main shareholder, CEO Benjamin Steinbruch, raise the question of whether a sale of Namisa will actually take place. This week, Mexico’s GFM gave up on selling Autlan because of skimpy bids amid hostile financing conditions. Goldman is advising CSN on the sale.

Brazilian rates are likely to rise at a slower pace amid an increasing likelihood of a global economic slowdown, which will pressure economic activity in Brazil as well as commodity prices, according to Bradesco. Dalton Gardiman, chief economist at Banco Bradesco BBI, the investment arm of Brazil’s largest non-government bank, has lowered his year-end 2008 Selic target by 25bp to 14.25%. He now expects just one further increase of 50bp at the October 28/29 Copom meeting and no change at the December meeting. The bias on inflation is now downward, according to the analyst.

Brazil’s JBS says it has made at least BRL722m in financial gains because of the recent depreciation of the real against the dollar. The announcement comes as Brazilian exporters scramble to reassure investors that their hedging strategies are still in the money, after poultry producer Sadia and paper maker Aracruz announced large losses last week due to underwater derivatives positions. JBS says it has not had problems managing FX volatility, and that the strengthening of the dollar against the BRL has actually boosted the value of JBS’s USD foreign assets, yielding gains in its daily hedging operations. Steelmaker CSN, responding to JPMorgan report forecasting an ADR-swap related loss, and miner Vale, has also announced suffering no FX-related derivative losses due to markets volatility.

Brazilian miner Vale plans to pour $4.05bn into expanding a port in the northeast of Brazil over the next 4 years. The investments are to be made in annual $1bn installments, says the company. The main destination for the funds is the Ponta da Madeira port, in the state of Maranhao, where two piers will be built to complement the two already there. The company is increasing iron ore production in neighboring Para state and plans to use the port to ship materials to Europe via Rotterdam. Vale officials tell local press they plan to double production of iron ore at the site and therefore need to hike capacity. A company official says expansion is part of Vale’s previously announced $59bn capex program, declining to specify how it will be funded.

After the rout, LatAm equity has recovered slightly, outperforming US stocks, but not as much as it overshot on the downside. Brazil’s Ibovespa rallied 4.59% to 48,142, off the day’s high at 48,658. It skidded as deep as 43,766 in the previous session, which saw the sharpest decline in more than a decade. The BRL meanwhile jumped 3% to BRL1.905/USD, after scraping 1.964/USD Monday. Other regional stocks and FX also experienced a relief rally, including Mexico, whose bolsa jumped almost 4% to close at the 24,889 peak. It scraped 23,789 Monday. The peso meanwhile flipped back to MXP10.94/USD, from MXP11 the previous day. The Dow Jones gained 4.7% after shedding almost 7% in the previous session amid a sharp uptick in volatility. “A version of the TARP still seems likely to pass the Congress eventually; there could be some amendments. The problem is timing,” says Citi. “These events are therefore likely to trigger a short-term bounce in Latin American equities from close to current levels,” it adds.

Vivo Participacoes is preparing to issue BRL550m in 1-year promissory notes after receiving approval from its board, it said. The notes represent its second trip to the short-term market in recent months and are expected to pay an interest rate of 110.2% of the DI rate. Bradesco and HSBC are managing the sale, according to an investor relations official. Vivo sold BRL500m in one-year promissory notes in July through Caixa Economica Federal at 106.5% of DI. Promissory notes have become a more attractive option for Brazilian corporates this year, with other recent issuers including Telemar and Bradespar.

Mirabela, the Australian-owned nickel miner seeking funds for a Brazil project, has changed the terms on a $280m 6.5-year loan it is syndicating, due to a substantial rise in cost of funds at lenders. The margin has been bumped up to 325bp over Libor during the construction period, from the 250bp it was originally launched at, say people familiar with the terms. For post-completion, the margin has risen to 300bp. Up front fees have also been flexed up to 175bp for $30m tickets, versus 100bp, and to 125bp for $15m chunks, from an originally proposed 75bp. Lenders are at the mercy of a freezing of the interbank market that has pushed 3-month Libor to around 4.10% this week. The Mirabela project loan is part of a $518m financing package. Australia’s Mirabela has secured $100m in subordinated loans from the offtaker: $50m from Votorantim and $50m from Norilsk, the major Russian nickel producer. The Norilsk loan is convertible into 5m shares at $8.00 apiece. Barclays and Credit Suisse are leading the transaction, which was launched mid-September.

Brazilian car rental agency Localiza has suspended plans to issue BRL300m in 2012 debentures for up to 60 days, citing poor market conditions. It began the operation September 16 through Unibanco and aimed to set the coupon during bookbuilding. The issue was to be a follow up to an August offering of BRL300m in 2011 bonds at DI plus 180bp via Bradesco, as Localiza continues to raise funds to expand its fleet. LatAm’s largest car rental provider also has the option of short-term paper, having sold BRL300m in 1-year promissory notes at DI plus 95bp in February.