Brasil Foods Lays Golden Bond Egg

Investors have lapped up Brasil Foods’ debut $750m 2020 bond issue, which was upsized by 50%, priced well through guidance and traded steady on the break. Buyers appear confident about the prospects for the entity formed from the last year’s combination of poultry rivals Perdigao and Sadia, ordering more than $5bn of the tasty offer, according to bankers on it. The BB+/Ba1 deal priced at 99.127 with a 7.250% coupon to yield 7.375%, or UST plus 377.4bp, inside 7.625% area guidance. Despite tightening and growth from an expected $500m, the bond was heard trading up around 0.5 points late Thursday, investors say. Despite widespread US-inspired market weakness, Brasil Foods appears to have taken advantage of overall bullishness on Brazilian corporates. It also seems to have convinced investors of a solid rebound from Sadia’s credit crisis-related balance sheet problems. “They are coming from a messy background, but if you look at where the numbers should be eventually, this looks like a low triple B credit,” says an EM investor following the deal. He adds that such an upgrade could come within a year and tighten spreads by up to 100bp. In a research report, RBS spots fair value on the new bond at 25bp-50bp wide of outstanding 6.875% Sadia 2017s that trade to yield around 7.000%. “Quality Brazilian names are getting a good reception,” says a banker away from the trade, despite investors beginning to become a bit more selective overall. Itau, JPMorgan and Santander managed the sale. Lower rated Brazilian agriculture names, including Minerva and Vanguarda, are poised to follow, though HY market conditions are looking less rosy.