Gerdau Kicks off Well-Staffed Bond Show

Gerdau is preparing a benchmark-sized 2019 bond, expected to price next week. The Brazilian steelmaker will begin a 2-team roadshow Friday in Switzerland, visiting London and Los Angeles before wrapping up Tuesday in Boston and New York. The transaction is set to follow as soon as Wednesday. The issue is expected to be large, as a whopping 6 banks have joint books: BofA-Merrill Lynch, Citi, HSBC, Itau, JPMorgan and Santander. In the group, HSBC and Santander are active bookrunners, and Itau is described by the group as “quasi-active.” The following 8 banks were also named as co-managers: Banco do Brasil, BBVA, BNP Paribas, Bradesco, Calyon, Goldman Sachs, Morgan Stanley and Scotia. The BBB minus deal is to be issued by Gerdau Holdings and guaranteed by several units, including Gerdau Ameristeel, which has funded separately in the past. Proceeds are marked for refinancing debt. Gerdau plans to invest BRL9.5bn in the next 5 years as expected demand for its products rises. Gerdau’s 7.25% 2017 bond was heard trading to yield around 6.90% Tuesday, with rival CSN’s 2019 at around 6.95%. Arcelor Mittal’s 2019 was trading to yield around 7.10%. Gerdau retapped its 2017 for $500m to yield 6.875% in April 2008, its last visit to the cross-border markets, through ABN, HSBC and JPMorgan. “In addition to its strong business position (Gerdau is one of the largest steel producers in the Americas) and resilient credit quality, Gerdau stands out for its strong liquidity position, significant gross debt reduction and sound investment plan,” says Fitch in its rating report on the new issue.