Telemar Redials Bond Issue

Brazil’s Telemar has revived dollar debt plans and is preparing a roadshow next week to support an issue of up to $750m in 10-year bonds, half the amount sought 7 months ago. The issuer’s Telemar Norte Leste unit will begin investor meetings in New York Monday and wrap up on the US West Coast Thursday, with a separate team presenting in Europe during that time, according to bankers managing the sale. Last September, the issuer aimed at 8.5% area yield on 10-year notes, as part of a $1.5bn offer of 5 and 10-year noted that was pulled amid market volatility. Investors say spreads have widened about 150bp-200bp since then, making 10% a more likely starting point this time around. Proceeds from the sale will go towards refinancing debt from last year’s acquisition of Brasil Telecom. Telemar has BRL3.6bn in 1-year bridge financing due in July. It is followed by a BRL2bn facility due in December that it opted to take out after deciding against a September cross-border sale. Fitch has assigned the new bond transaction a BBB minus rating. The agency notes strong cashflow generation and an adequate financial profile, underpinned by local fixed-line. It says integration of Brasil Telecom should boost the competitive position of the company, particularly in mobile and corporate segments, and geographically complement fixed and broadband. Fitch expects net debt to Ebitda to be approximately 2x by end-2009. Banco do Brasil, Bradesco, Citi, Itau and Santander are joint bookrunners on the transaction. The issue is set to be the second from a true Brazilian corporate this year, following Odebrecht’s $200m offer last week, which traded up. Eletrobras is meanwhile expected to name banks soon for a dollar bond worth up to $600m. In the local market, Telemar is selling up to BRL3bn in debentures, including 2011 and 2012 notes, paying DI plus 115% and 120%, respectively, also to repay debt.