Category: Brazil

Ecodiesel Brasil, the Brazilian biofuels shop, has restructured some BRL206m in debt following a period of financial difficulty related to the volatile nature of its sector and an overly aggressive capex program. The restructuring includes a BRL184.8m 4-year credit facility with a 1-year grace period from Bradesco, Fator, Fibra, BMG, Daycoval and Cedula. People close to the borrower say cost of the funds is in line with the company’s existing debt, understood to be in the 500bp-600bp over CDI range. The company also gained extensions on a BRL30.5m bank note with Banco Real, and restructured BRL35.2m in debt from entities it does business with. The company tapped G5 Advisors, a Sao Paulo-based boutique, to advise.

Three subsidiaries of Brazilian transportation logistics company ALL are planning to raise BRL500m in 2018 bonds. ALL’s Ferronorte, ALL Malha Sul and Ferroban units will each take a BRL166m tranche of the sale. The notes pay 108% of DI. Proceeds will fund ALL’s investment plans at each unit. Credit Suisse is managing the transaction.

Global EM equity fund managers surveyed by Merrill Lynch are net overweight Brazil and – for the first time since it started doing the survey in 2006 – also slightly overweight Mexico. But the buyside is starting to cool on Brazil versus other BRICs, with a small majority saying it was the least preferred credit of the four. Russia is most popular BRIC, and EMEA overall is seen as the most attractive EM region. Investors generally are negative on LatAm and Asia equity, Merrill data shows. Some 72% of EM fund managers surveyed say that EM corporate profits growth will deteriorate slightly in the next 12 months. US assets are generally back in favor for institutional investors, supported by a widely held belief that the USD is undervalued. The Merrill survey also highlights how the credit crisis may be starting to change for the worse. “Dramatic changes in sector rotation and currency markets suggest that the credit crunch may be morphing from a financial crisis into an economic one as fears grow about the outlook for the global economy,” says Merrill. “Almost one in four believe the global economy is already in recession, and almost half the respondents expect the world to experience recession in the coming 12 months. Evidence that the economic slowdown is spreading to economies like Japan and the eurozone has dashed any remaining hopes of economic decoupling,” it adds.

Mexican manganese and ferroalloys producer Compania Minera Autlan is heard garnering interest from a handful of bidders, including Brazilian mining giant Vale. Vale – whose recent manganese sales hit a record – is understood to be looking at Autlan as prices for its main product hit historic highs. Autlan, which went onto the block earlier this year, has a market cap of $1.96bn and trades at a price to earnings ratio of 19.4x, according to Economatica. If sold to a strategic buyer, the asset could fetch a premium of 20% or more, taking its potential price tag above $2.35bn, says a Brazil-based mining analyst who asks not to be identified. “I don’t think it would make sense for Vale to acquire Autlan,” says Raphael Biderman, a natural resources analyst at BBI, remarking on the low grade of manganese found in the company’s mines. A handful of other steel and mining concerns are nonetheless understood to be studying the integrated operation. Autlan’s executives are said to be targeting a sale by October. Vale recently raised $12bn in a record equity follow-on whose proceeds are destined for capex and M&A. Autlan stock soared earlier this year amid speculation of a sale but saw a sharp correction in July. It closed yesterday’s session at MXP73.47, some 22% off of the July 21 high. Autlan, part of Grupo Ferro Minero, hired Lehman to advise it on a sale. Autlan did not return repeated calls seeking comment. A Vale spokesman declines to comment on M&A plans.

Evercore Partners, the New York-based boutique investment bank, has teamed up with G5 Advisors to advise on cross-border deals for Brazilian firms. Evercore will work with the Sao Paulo-based investment banking boutique and investment management firm on strategic cross-border M&A and related transactions between Brazilian companies and entities located outside South America. They may also team up for deals involving companies in other South American countries, says Evercore. “Evercore’s strategic alliance with G5 Advisors is another step in the globalization of our firm, enabling us to expand our presence in South America and provide superior advice and execution for our clients,” says Roger Altman, chairman and CEO of Evercore. “Brazil, Latin America’s largest economy, continues to grow in importance globally.” Corrado Varoli, CEO of G5 Advisors, is a former head of LatAm for Goldman Sachs. Former Petrobras CEO Francisco Gros is also a G5 senior partner. Varoli says the jv will give its clients in Brazil access to Evercore’s global reach and services. “Our two firms are built on the same principle of providing sophisticated, objective advice to our clients and our geographic footprints are complementary,” he adds.

American retailer Wal Mart says it plans to invest BRL1.6bn -BRL1.8bn and open around 80 to 90 new stores in Brazil in 2009. The announcement was made by Wal Mart’s president and CEO for the Americas, Craig Herkert, after a meeting with Brazilian president Lula yesterday. This year, the company is investing BRL1.2bn on building 36 new stores in Brazil that will generate over 7,000 jobs, Wal Mart says. The retailer has operated in Brazil since 1995. Yesterday, Wal Mart announced a $100m-$130m investment to further develop operations in Argentina.

Argentina’s Ternium benefits from its exit from Venezuela and may be looking to invest in Brazil, according to UBS Pactual, which rated the stock a buy. The shop notes a strong Q2 and expects the sale of Sidor to be followed by new investments, with talks of new mill in Brazil. Without Sidor, UBS sees Ternium trading at an attractive 3.7x EV/EBITDA for 08E, which it says is a significant 30% discount to LatAm peers. Ternium Q2 net profit was almost 60% higher.

Pimco, the global investment management firm with almost $830bn in assets under management, takes cover from the global markets storm in Brazil. “Concentrate investments in the economies with credible policy anchors and balance sheets strong enough to help them weather the storm,” EM portfolio manager Michael Gomez tells clients. “At the top of this list is Brazil, with local bonds a particularly attractive long-run investment. Five-year bond yields are close to 14% in Brazil, with inflation running close to 6%. The Central Bank has cemented its credibility by raising rates aggressively to ensure inflation returns to target. This provides investors a unique opportunity to receive high interest rates in investment grade credit, with credible monetary policy, prudent fiscal policy, solid balance of payments dynamics and political calm,” Gomez adds.

S&P has raised Brazilian media conglomerate Globo Comunicacao e Participacoes to BBB- (stable) from BB+ to reflect its increased confidence in the resilience of Globo’s financial performance despite competition. “While Globo’s business profile, with its dependence on advertising revenues and exposure to cost inflation, will be a constraint on the rating going forward, we believe that the company’s financial strength will remain fairly stable in the medium term,” the agency says. Globo is supported by a dominant position in Brazil’s broadcast TV market, featuring programming with considerable levels of self-produced content, a leading position in production of local-language pay-TV content, and strong financial metrics, S&P adds. “These positives help mitigate the risks derived from the concentration of Globo’s revenues and cash generation on TV broadcasting,” the agency says. It also worries about a mismatch between BRL cashflow and USD debt.

Brazil’s SLC Agricola has agreed to a BRL62.3m 2015 loan with Banco do Nordeste do Brasil, a regional development bank. The Brazilian agribusiness company will pay annual interest of 8.50%, though it will receive a discount for full payment by the final maturity date, say company executives. As a result, the all-in rate is effectively 7.23%, they say. The funds will support the development of six farms in the states of Maranhao and Bahia.