UVA Talks Double Digits

Brazilian sugar and ethanol producer Usina Vista Alegre (UVA) is out with preliminary guidance of 11% on a 7-year NC4, coming in-line with whispers heard earlier this week. Pricing could take place as soon as today. Size is expected to be between $150m-$200m on the 144A/Reg senior unsecured bond, which marks the issuer’s debut in the international capital markets. Double digits are seen as necessary to compensate investors buying into a credit that has a leverage ratio of 5.3x fueled by recent growth plans. Tight liquidity is also an issue. As of March 2011 the Sao Paulo-based company had BRL12.8m of cash versus BRL 124.5m in short-term debt, which will partly be paid down through proceeds from this offering, Fitch says. “Their problem is liquidity,” notes a London-based EM investor who has opted not to participate. Grupo Virgolino de Oliveira (GVO), a member of the Copersucar cooperative, is considered a direct comp to UVA. It came to market earlier this year with a $300m 7-year NC4 that was priced at par to yield 10.50%, the wide end of 10.25%-10.50% guidance. However, GVO is thought to have a stronger liquidity position than UVA and can count on Copersucar as a guaranteed buyer. UVA wrapped up roadshow in Los Angeles on Thursday. BTG Pactual is sole lead. Ratings are B minus/B3 by Fitch and Moody’s.