Brazilian asset manager Gavea Investimentos plans to begin raising its fourth private equity (PE) fund this year, says Arminio Fraga, co-founder of the firm, and chairman of BM&FBovespa’s board. “Companies are interested in investing again and are seeking capital,” he says. “We plan to go out to our investors [soon] to raise a new fund,” adds Fraga, speaking in New York following a talk on the state of Brazil’s economy. Fraga notes that Gavea is closing in on up to 3 new minority positions in private companies with cash from its third, $1.2bn fund, raised in 2008. They involve 2 minority investments of roughly $130m-$170m each in education and real estate companies, respectively, and a third restructuring-type investment of around $60m. Those will leave room for 3 more investments, which will leave the current fund fully invested, says Fraga. That will lead Gavea to raise a new fund, which the executive says will likely be at least the same size as the previous one. Fundraising came to a grinding halt at the start of the financial crisis and as companies hunkered down, cut investment plans and focused on survival. PE firms also turned to tending to portfolios and keeping them afloat, rather than chasing investment opportunity. Few if any in the region announced major new investment. New investment opportunities are now appearing, helping thaw LatAm PE.
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PDG Realty Prints Follow-On in Down Day
Brazilian real estate developer PDG Realty has raised BRL1.6bn through a follow-on priced in one of the worst days the Bovespa has seen in months. The stock fell 3.63% in the session to BRL14.60 and the shares were priced BRL14.50, at virtually no discount. A banker on the deal says Thursday’s drop, which was smaller than the Ibovespa’s 5% plunge, was in itself a substantial discount to recent trading levels. The company sold 97m shares plus a 14.6m share greenshoe to raise BRL1.62bn. Priority investors, which include former Pactual partners and Vinci, the fund formed upon the dissolution of Pactual Capital Partners, purchased around 25% of the issue. Credit Suisse, Pactual, Itau BBA, Goldman Sachs, Santander and Bradesco BBI led the deal.
Risk Spike Hammers Brazil Issues
A global markets rout amid fears of default in Greece, Portugal and Spain is beginning to infect LatAm. After a botched Brazil IPO this week, a pair of debt issues appears to have run into trouble. A 2015 bond transaction from BES Investimento do Brasil has been postponed, according to investors following it. Baa2/BBB minus BESI was set to finish a US and European roadshow Thursday marketing a deal expected at $350m. Deutsche Bank, Espirito Santo and Standard Bank were running it. Worries across global markets also resulted in radio silence on a debut $200m 2015 bond from grower Vanguarda do Brasil, which had been roadshowing through Tuesday. Officials familiar with the B3/B minus transaction say the sale is still being negotiated with investors, and that as of late Thursday, there was still a plan to launch. Morgan Stanley is leading Vanguarda. Also hoping to do bond deals from Brazil are Marfrig (B1/B+) and Independencia. However, risk aversion is rising and LatAm issuers need to move swiftly to avoid being caught in the crosshairs. “Latin America is vulnerable to a crisis in Southern Europe or any other emerging market,” says a veteran EM trader. He adds that hedge fund purchases of Eurozone CDS, combined with short selling of developed world stocks, has the ability to seriously destabilize LatAm. “The world has gotten much smaller, and sovereign debt is susceptible to vulture investor tactics,” he adds. The Bovespa ended almost 5% lower on the day and Mexico equity fell more than 2%.
Superfinanciera Ticks Codensa Issue
Colombia’s securities regulator has given energy company Codensa the green light to issue up to COP600bn in bonds. The issue, rated AAA, will have 5 tranches with maturities between one and 25 years. The tranches will be COP, UVR or USD-denominated and pegged to DTF, IPC or IBR or pay a fixed rate. A company spokeswoman says the timing of the issue has not been decided and that it has not been mandated. Codensa is owned by Spanish energy company Endesa.
Correction: Coke Femsa Fizzes Through Sovereign
A February 3 Daily Brief entitles “Coke Femsa Fizzes Through Sovereign” misidentifies the investor base that consumed most of the bond transaction. The majority of buyers were US high-grade.
Fitch Downgrades Jamaica to RD
Fitch has downgraded Jamaica to RD from CCC after the sovereign’s closed its domestic debt exchange. The agency says the deal constitutes a coercive debt exchange and that that more than 10% of the total central government’s foreign currency denominated debt to private creditors was subjected to the exchange. Simultaneously, and somewhat confusingly, Fitch also upgraded Jamaica’s long-term foreign and local currency IDRs to CCC and placed them on rating watch positive, as the exchange was successful and could lead to the approval of the $1.3bn IMF stand by program. Fitch analysts did not return calls seeking clarification. Jamaica estimates that the participation rate has already reached over 90% of eligible securities. This in turn will yield important fiscal savings in terms of debt service, says Fitch. Fitch notes that the foreign currency denominated securities issued in international capital markets are not affected by the debt exchange. It affirms the sovereign at CCC.
Fitch Sweetens Cosan Outlook
Fitch has placed the BB minus ratings of Cosan Combustiveis e Lubrificantes (CCL) on rating watch positive and Cosan’s BB minus ratings on rating watch evolving. Cosan has agreed to a possible merger of its sugar and ethanol, cogeneration and fuel distributions units with Shell’s Brazil operations. The merger will generate two JVs, one focused on sugar and ethanol and co-generation businesses, the other on fuel distribution. As part of the merger, Fitch expects CCL to be fully transferred to the fuel distribution JV. If the transaction goes through, Cosan will become an equity participation company with stakes in both JVs and in other businesses that will not be a part of the merger, such as logistics, lubricants and agricultural land development. CCL’s positive rating watch reflects a strengthening operating and financial profile of the company after the association. The fuel distribution JV will benefit from Shell’s contribution of unleveraged assets that will generate a steady and relatively predictable cashflow, and from the stronger business profile associated with the larger combined size and market share, says Fitch. Cosan’s evolving rating watch status reflects the uncertainties on the final capital structure of the sugar and ethanol JV and the expected equity participation characteristics of Cosan, with its remaining debt subordinated to the operating companies. Cosan and Shell will each contribute $4.9bn in assets to both JVs. On a combined basis, Cosan will contribute $2.5bn in net debt and Shell $1.6bn in cash to both JVs, but it is not clear at this point how much debt and cash will be allocated to each, Fitch says.
Peru to Keep Rates Unchanged
Market consensus is that Peru’s central bank will keep the monetary policy rate at 1.25% today. Morgan Stanley continues to expect the bank will keep the policy interest rate on hold at 1.25% and expects monetary tightening during the second half of this year. Bank of America Merrill Lynch agrees that the rate will stay at 1.25% until the second half of 2010. It expects annual inflation to increase to 1.5% by the end of 2010 from 0.1% at the end of 2009.
Argentina Names Kirchner Friend to Lead CBank
Argentina’s President Cristina Fernandez de Kirchner will name Mercedes Marco del Pont, president of state-owned Banco de la Nacion Argentina, as head of the central bank, replacing the resigned Martin Redrado. Congress must still approve the choice of Marco, a former congresswoman who is seen as a Kirchner loyalist. “The fact that well-respected economist Mario Blejer didn’t accept the post should be considered by the market in a negative light,” RBS says in a research note. “The BCRA’s independence, however undermined during Redrado’s term, is likely to be wiped out going forward,” it adds. RBS expects the Bicentennial Fund plan, where $6.6bn in central bank reserves would help to settle up with creditors and pave the way for a return to borrowing internationally, to be implemented soon after her appointment. “There is growing speculation that Marco could spearhead government favored changes in the central bank charter, since when as a lawmaker she sponsored a project that was perceived to limit the autonomy of the central bank,” adds Goldman Sachs. It also notes that the government still plans to launch an offer to holdouts as soon as it secures regulatory approval in the relevant jurisdictions. Redrado was dismissed for not backing Fernandez’s Bicentennial Fund plan.
Nestle Percolates Mexico Investment
Multinational food company Nestle says it will invest MXP5bn ($390m) in Mexico over the next 3 years. It aims to strengthen its production capacity and infrastructure in that market, said CEO Paul Bulcke during the World Economic Forum meetings in Davos, according to a company statement. A major part of the MXP5bn will be invested in the Nescafe soluble coffee plant in Toluca. Nestle will increase the facility’s capacity by 40%, which will make it the biggest soluble coffee plant in the world.