CNAA Financing Features Sweet Hedge

A roughly $630m financing for Brazilian sugar and ethanol startup CNAA will feature a novel sugar hedge that helps it raise lower-cost financing at longer tenors, says an executive close to the company. The instrument, put in place by Goldman Sachs and BNP Paribas, is designed to reduce the borrower’s exposure to fluctuating sugar prices for up to 5 years, covering 70% of production. The hedge will serve as a revenue guarantee to help CNAA raise around BRL440m in 13-year a syndicated B-loan via BNP and BRL450m in 15-year funds directly from the IDB. The company executive says he hopes pricing on the syndicated portion, which has yet to be launched, can come in the Libor plus 300bp-350bp range. CNAA has already raised a $120m pre-export loan via Bradesco, ABN AMRO and Banco Espirito Santo, part of the total $630m it is raising to develop new mills and increase production. CNAA has roughly $330m in equity, much of which is held by private equity funds belonging to Goldman Sachs, Carlyle Riverstone, Merrill Lynch, Discovery Capital, and Global Foods. Sugar and ethanol company SantelisaVale has a 28% stake in CNAA.