Category: Brazil

Brazilian paper and cellulose producer Aracruz has closed its offer to buy back its debt maturing in 2011 and 2012. The bonds to be purchased represent 43.6% of the total debt in the market. The company will buy back a total of $176.4 million of its 2011 bonds and $58 million of its 2012 bonds. The deal is being managed by Citigroup and JP Morgan.

Electricité de France (EDF) has closed the bidding for a stake in its Brazilian unit, Light. EDF has still to say exactly how much of its unit it will sell off. Last year Light posted profits for the first time in six years. Among those interested in bidding were a consortium made up of construction firm Andrade Gutierrez and electricity producer Cemig; the Energia Rio grouping which included UK investment fund Millennium; Patria-Primus bank and GP Investimentos. Goldman Sachs and Citibank are managing the sale.

Peruvian company Grupo Romero, which has interests in the food, logistics and finance sectors, has agreed to buy the 25% stake of AmBev’ s Peruvian unit for an undisclosed sum. The Brazilian brewer, owned by Belgian company InBev, says the sale to Romero as a strategic partner will give its Peruvian unit local know-how and allow it to grow in the market.

In line with market expectations, Brazil’s Central Bank yesterday, Wednesday, cut its benchmark overnight lending rate (Selic) three-quarters of a percentage point to 16.5%. This is the lowest rate in almost a year and a half and is the second month in a row the Bank has made such a large cut in the rate. The government wants to fuel faster growth in the economy, which has stagnated in recent months. GDP growth last year has been estimated at only 2.2%, well behind the 4.9% expansion seen in 2004 and far behind other large economies in the region such as Venezuela and Argentina.

Brazil’s efforts to improve its debt profile and move closer to investment grade rating have paid off with an upgrade from Standard & Poor’s. S&P raised Brazil’s long-term foreign currency sovereign credit rating one notch to BB from BB-, two notches below investment grade. Last week Brazil announced it was to buy back $6.6 billion of outstanding Brady bonds. At the end of last year it paid back its entire $15.5 billion debt to the IMF two years ahead of schedule. Moody’s Investors Service continues to rate Brazil’s bond Ba3, three levels below investment grade.

Colombia is to join Brazil and Venezuela in buying back outstanding Brady bonds as part of its strategy to reduce foreign currency debt obligations. Last year, Colombia’s foreign currency-denominated debt as a share of overall debt fell to 33% from 44% in 2004. Surging commodity-led export revenues will be used to fund the repurchase of up to $4.3 billion of the dollar- and euro-denominated debt instruments maturing between 2006 and 2011. Colombia’s exports earned $21.2 billion last year, a rise of 27% over 2004.