Brazil Exchange Debut Trades Up

BM&FBovespa marked its international DCM debut with the first investment-grade Brazilian bond since the cross-border markets shut down in late April. The exchange’s $612m in 2020 bonds took advantage of bullish expectations about growth in Brazilian markets to draw about $4.5bn in total demand for the issue. “It’s a good credit and a good story. It’s a play on continued Brazilian growth,” says a participating Brazil-focused investor at a New York asset manager. Size was capped at $612m to match the amount needed to fund a recent acquisition and traded up about 1.5 points by Friday’s close, according to traders. The BBB+/Baa2 2020 landed at 99.635 with a 5.500% coupon to yield 5.548%, or UST plus 250bp. This was the tight end of 262.5bp-area guidance, and in from 275bp-area initial talk. The issue offered a pickup to the Baa2 BNDES 2020, which traded around UST plus 235bp-240bp Friday morning, according to investors. A less liquid 2020 bond from Nasdaq (Baa3/BBB) was also trading in the 235bp-240bp area, investors say, offering another comp. Buyers notes optimism about continued expansion and consolidation in Brazil markets, as well as the issuer’s low debt levels, as reasons to buy. Some 250 accounts participated, according to bankers managing the sale, with US-based investors getting about 50%, Europe 35%, and 5%-10% going to LatAm. Proceeds will be used to fund the acquisition of a stake in US-based CME Group. BM&F agreed in February to raise its ownership in CME to 5.0% from 1.8%. Bank of America Merrill Lynch, Bradesco, HSBC and JPMorgan managed the bond issue.