Energisa Talks Mid-9s

Brazil’s Energisa, shopping a NC5 perp this week, has set 9.5% area yield guidance for the bond, expected to price as soon as today at $200m. The level includes a premium for an interest deferral option included in the bond, investors say. One potential buyer estimates that the electric distribution holdco would pay 100bp less for a more traditional perp. The structure allows coupons to be deferred at any time in exchange for a 100bp step-up and the halting of dividend payments on equity. Cemex has used a similar structure in the past. Though this hybrid structure is usually seen in a subordinated deal, this bond is senior. Fitch and Moody’s do not offer equity credit, and assign BB minus and Ba2 ratings, respectively. BAML, Morgan Stanley and Santander are managing the sale. Proceeds are marked for general corporate purposes. Energisa is the holding company for 5 electric distributors in the states of Paraiba, Sergipe, Rio de Janeiro and Minas Gerais, and has been a frequent issuer in Brazil’s local bond market.