Category: Brazil

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.

Steel processor ArcelorMittal is acquiring 49% of the share capital in Brazilian mining company Mineracao Piramide Participacoes (MPP). MPP’s activities are focused on exploration and development of iron ore and manganese reserves in the region. The price to be paid by ArcelorMittal will be based on the amount of iron ore and manganese reserves in situ assessed according to a code for the reporting of mineral resources and ore reserves of the Australasian joint ore reserves committee, ArcelorMittal adds. Last week, ArcelorMittal announced investment of $1.6bn in long carbon steel operations in Brazil.

Mercedes Benz do Brasil has announced a BRL1.5bn investment over the next three years to revamp its truck, bus and parts production operation in its Sao Bernardo do Campo plant. Daily production of the plant is expected to increase by 25% after the investment. With the investment, the company seeks to meet increasing demand for its products in the local and external market and to make more flexible its production operation in the face of market fluctuations, it adds.

The board of Brazilian car rental agency Localiza has authorized management to raise up to BRL600m through debentures. The issuance will be divided into two series of up to BRL300m each. Localiza did not provide further financial details or an indication of timing. In June, its board authorized raising up to $500m in the international or domestic markets. Last week, Localiza IR director Silvio Guerra told LatinFinance that debt was a better option than equity, given that the company is just 1.3x levered.

Brazilian development bank BNDES has approved a BRL128m 12-year loan for BBE-Brasil Bioenergia. The renewables developer will pay TJLP plus 3.44%. Proceeds fund 80% of a BRL160m plant to extract vegetable oil from soybeans and produce biodiesel in the state of Mato Grosso do Sul.

Brazilian meatpacker Bertin has agreed to buy peer Cooperativa Rondoniense de Carne for BRL55m. The purchase of the producer located in the Amazon region is still subject to approval by regulators and the companies’ boards. The move is the latest in a round of international and domestic consolidation among Brazilian beef companies.

Brazilian development bank BNDES has invested BRL32.5bn in infrastructure in the 12 months to June 30, up 80% from the corresponding period one year earlier. The bank lent a total of BRL78.8bn across all sectors in the 12-month period, representing an increase of 34% and reaching a new record. The BRL22bn that went to the land transportation and electric power sectors was 68% of infrastructure-destined funds, by far the largest class in that group. BNDES also notes that financings linked to domestic market investments rose 23%.

Moody’s has downgraded all debt ratings of Brazilian airline Gol to B1 from Ba3 and all ratings were placed under review for possible further downgrade. The action comes after the airline’s announcement of cuts in its fleet and eliminating dividend payments. The rating downgrade reflects continued deterioration in the financial strength of Gol and prospects for a further decline in the financial metrics barring significant improvement in the company’s cost structure, the agency says. Although the company has eliminated most international routes of its troubled subsidiary Varig, Gol’s unit costs have increased due to challenges of realigning its operations. “Gol has several planned initiatives to increase revenues by increasing sales to customers through its installment-purchase plan and increasing cargo and ancillary revenues,” Moody’s says. “However, these efforts to boost sales are unlikely to offset incremental costs, primarily fuel related,” the agency adds. Without a decline in fuel costs, these actions may not be sufficient to allow the company to improve levels of profitability and cashflow generation to levels consistent with the B1 rating, Moody’s states.