Arcos Dorados Takes Hefty Market Flex

Arcos Dorados, the holding company for McDonald’s’ LatAm assets, has accepted a sizable increase in its cost of funds for a $350m 5-year facility. The deal, originally launched at Libor plus 275bp, will now include an extra 150bp spread to compensate banks for their rising cost of obtaining capital from other banks. Similar to Braskem, which recently closed a $725m 5-year deal, the borrower was asked by banks to include the additional spread after the deal had been launched. The difference is that Arcos agreed to take on the extra cost for the entire life of the 5-year deal, while Braskem lenders must address the issue every six months, if necessary. With banks funding themselves at spreads over Libor of 100bp-200bp, corporate borrowers in need of funds are likely to feel the ultimate impact. Bankers say the pipeline for loans is enormous in the region, and a slew of deals is set to be launched as soon as market conditions stabilize. Santander and Scotia are joint bookrunners for Arcos, with the former taking a lead role. Bradesco, a relative newcomer to international syndications, signed on as an MLA. A private equity consortium led by former McDonald’s executive Woods Staton and Gavea Investimentos owns Arcos.