Usiminas Joins Rush For Revolvers

Brazil’s Usiminas is the latest LatAm borrower to sound out loan bankers on a possible revolver after seeing how miner Vale locked in ultra-tight pricing on a similar structure earlier this year, says a New York-based banker familiar with the company. The steel concern is seeking up to $1bn through a 5-year tenor, while chemical firms Braskem and Mexichem are also considering revolvers as a way to obtain cheap liquidity, bankers say. “Following the recent Vale transaction a lot of our clients are looking to go to market with a revolver,” says a New York-based banker at a European financial institution. This comes as Mexican state-controlled entities Pemex and CFE seek better terms by refinancing facilities taken out before Vale established its new pricing benchmark. At the current applicable margin, Vale is paying 65bp over Libor on its revolver for a draw-down of up to 33%, 80bp for between 33% and 66%, and 95bp after that. The region’s borrowers clearly see an opportunity in a bank market where a larger number of financial institutions are chasing relatively few assets. So far lenders have been pliable on pricing, but concerns over potential market fallout from Greece’s debt problems and expectations of stricter regulatory capital requirements in the US may eventually create some resistance. “It seems strange that there is talk about repricings with all that is happening in Europe,” says the banker at the European financial institution. “But the market in LatAm has been so competitive that I haven’t seen much of an impact.” Still, voices of protest have been growing louder of late particularly concerning repricings just months after a deal has closed. “If they want to increase the maturity then it will be a much longer process and it will be much harder to get approval from credit committees,” adds another banker.