Safra to Test Global BRL Market

Banco Safra is looking to return to the BRL Global market for a second time in just over a month amid talk that the recent imposition of an IOF tax on derivatives may encourage investors to further migrate to the offshore curve and help spur more issuance of this type. This deal is coming directly from the Brazilian bank as opposed to Europe-based issuer that tapped the market in June with a BRL400m Reg S only 10% 2015 (BBB minus) that was priced at 99.627 to yield 10.125% via BAML and Safra, according to bankers. Banco Safra SA, rated Baa2 and BBB minus by Moody’s and Fitch, is splitting into two teams to market the 144A/RegS Global BRL trade amid expectations of a 5-year tenor. Today the borrower will be in London and Chile, where pension funds have shown interest in such bonds, and it will wrap roadshows on Tuesday in Los Angeles and New York. This comes after much talk that several Brazilian issuers are looking to replicate the success of McDonald’s franchise Arcos Dorados’ BRL400m 5-year global (Ba2/BBB minus) bond earlier this year. Brazilian banks such as Bradesco, Banco do Brasil and BNDES are all heard contemplating such structures as well as other corporates such as steelmaker Usiminas and perhaps utility Cemig, which recently completed non-deal roadshows with Deutsche Bank. Being a utility with revenues in BRL tied to inflation, Cemig is thought to be an ideal candidate for an inflation-linked BRL bond, much like Banco Votorantim did earlier this year. Yet despite bankers’ effort to pitch inflation-linkers, it is questionable whether this structure will truly take off this year. Still with both the euro and the USD under pressure, bankers think that investors are more willing to take on the currency risk embedded in plain vanilla Global BRL trades, though the Brazilian government’s efforts to contain the strength of the BRL could counterbalance this trend however briefly. More likely, however, the authorities’ attempts to control the upward trajectory of