Toll Road Sale Ends Brazil DCM Year on Strong Note

Brazilians are hopeful 2013 can top this year’s domestic bond market volume, with interest rates and the country’s infrastructure needs among the catalysts. In a positive sign, toll road operator Concessionaria Auto Raposo Tavares (CART) raised BRL750m ($357m) while getting foreigners to buy infrastructure debentures for the first time, in what is likely the domestic market’s final widely-distributed debenture sale of 2012. Volume for such deals, known as rule 400 transactions, stands at BRL14.30bn through Monday, according to the CVM, if large bank leasing deals are excluded. This easily tops last year’s BRL3.18bn total and nearly matches the BRL15.63bn raised in 2010. “The market this year was good in terms of volume and the number of transactions that took place, though there were still a lot of 476 deals,” says a DCM banker away from the CART transaction, referring to the limited distribution rule 476 bond transactions. This type of deal – often bought by a single bank – is also set to beat last year’s volume, with BRL62.74bn issued as of Monday, according to Anbima, up from the BRL48.10bn full year 2011 total. Both formats are important options for issuers, bankers say, but the more widely distributed sales are necessary for developing a secondary market that could encourage more corporate issuance. “The 476 trend is clearly reaching some limits of some important fund managers. I think we are going to see more and more 400s going forward,” says a Sao Paulo-based DCM banker. Infrastructure debentures, where foreign and domestic retail investors get tax incentives, should help as the new asset class develops. CART’s 2024 inflation-linked bond was divided into two parts to accommodate the foreign and local investor bases. A BRL380m 2024 tranche pays 5.8% and went to international investors, who benefit from not paying IOF tax due to the use of proceeds. A BRL370m portion pays 6.05% and was placed with domestic buyers. Both tranches saw much lower yields than the 8