Investors Leap on Brazil Mid-Cap Bank Test

Banco Cruzeiro do Sul is the first Brazilian bank to issue new dollar debt since last year’s troubles at Panamericano raised concerns about the country’s mid-sized banks and prompted regulatory change. The bank raised $400m on more than $1.5bn in orders, according to bankers on the deal. The Ba2/BB minus 2016 bond priced at 99.498 with an 8.250% coupon to yield 8.375%, the tight end of 8.500% area guidance. The bond traded up slightly Wednesday afternoon, according to investors. The yield compares to the 8.0% at which the bank’s 2015 bond traded, according to investors. “Cruzeiro has paid a premium, as the consumer lenders should be impacted more [by regulatory changes],” Natalia Corfield, EM credit analyst at ING, tells LatinFinance. She notes a 2020 subordinated bond from Brazilian peer BMG (Ba2/BB minus) trading at 8.4%, and imagines a new bond from Daycoval (BB) – starting investor meetings today – could come tighter than Cruzeiro. Corfield explains that new banking regulations in Brazil proposed after Panamericano should have more of a negative impact on consumer-focused lenders, like Cruzeiro, than those with corporate focus like Daycoval. Proceeds from the sale will be used to expand the bank’s capital base. Barclays, BCP Securities and UBS managed the sale. Cruzeiro’s last DCM deal had been a $400m 2020 Tier 2 bond, sold in September at a 9% yield, through the same trio.