Gerdau Loan Financing Gains Momentum

Bank of Tokyo Mitsubishi has joined BBVA as an MLA on a $2.75bn loan for Gerdau is taking out to acquire US competitor Chaparral Steel. The Brazilian steelmaker has hired JPMorgan, ABN AMRO and HSBC as joint book runners, and is looking to lure MLAs with $300m tickets to participate in the 3-tranche financing. It includes a 5-year trade related piece at Libor plus 100bp, a 6-year trade piece at Libor plus 125bp and a 5-year working capital facility at the same spread, according to people familiar with the transaction. It will go to general syndication as early as the week of September 17. Gerdau’s is the first large LatAm loan to be launched since the July-August sell-off, and the pricing on the deal reflects the new, less certain financing environment, say bankers. At BBB minus, Gerdau is rated just one notch below CVRD (BBB), but it is paying close to 40bp more on a trade-related facility that is half the size of the one taken out by the Brazilian mining concern less than a year ago. Brazilian steel is in the spotlight following rumors that CVRD would make a joint bid with BHP Billiton for fellow miner Rio Tinto. A deal, which would be the biggest in the sector’s history, would likely face both credit and regulatory hurdles. It would also propel the Brazilian firm to the top of the global commodities business.