When Fibria added $400 million in September 2015 to a $500 million term loan facility, the Brazilian pulp and cellulose producer went beyond increasing the size of the transaction. It also added five new lenders, underscoring the company as a bright spot in Brazil, where credit risk has soared and uncertainty has dominated markets. 

The original transaction, a $500 million triple-tranche pre-payment loan, was closed in December 2014 with a syndicate of eleven banks led by BNP Paribas and Natixis. The deal was backed by cash flows from contracts with buyers of Fibria’s eucalyptus cellulose. 

A few months later, the company began seeking financing for its $2.2 billion expansion to the Três Lagoas pulp plant in Mato Grosso do Sul, dubbed the Horizonte 2 project. The financial team pondered available funding opportunities, and decided to start by reopening the loan signed in December. 

The team was hopeful, but also concerned about appealing to lenders. “We thought that with conditions in Brazil deteriorating, we wouldn’t be able to get more than $300 million, because the sovereign credit risk had increased a lot,” treasurer Marcelo Habibe tells LatinFinance. “We were surprised by $515 million in offered commitments from twelve banks; we decided then to upsize the loan to $400 million, keep original terms, and add five new lenders.” 

The borrower was able to maintain the same terms as the original facility, which comprised a five-year amortizing loan at 130 basis points over Libor with a four-year grace period, a five-year bullet at 140 basis points, and a six-year amortizing loan at 155 basis points.

The pricing speaks to the company’s improving credit profile, in spite of Brazil’s deteriorating economy. That, in turn, is a combination of the company’s dollar revenues and the resilience of the pulp and paper industry compared to other commodities. 

All Fibria’s revenues are in dollars, and around 85% of costs are in local currency. “We may have to pay a bit more for the 15% we spend in dollars, but that’s vastly compensated by our revenues,” says Habibe. “China’s economic slowdown hasn’t affected us either, because tissue consumption has increased there by two digits per year, while the price has also climbed. The dynamics of this industry are different from other commodities. We explained to the banks that investing in Fibria was a kind of hedge against Brazil’s risk.” 

The strong standing has also been recognized by ratings agencies. While swathes of Brazilian borrowers have been downgraded this year, Standard & Poor’s elevated Fibria’s ratings to BBB- from BB+ in April, and Moody’s upgraded the company to Baa3 from Ba1 in November. Similarly, equity investors have cheered the company on: Fibria’s share price increased by 53.8% between January and mid-December. 

Fibria is casting a wide net for the remaining funds for the Horizonte 2 project, which will be 70% funded by debt. The company issued 675 million reais ($177 million) in local agribusiness receivable certificates, in addition to borrowing from regional development agencies FDCO and Sudeco, the Finnish export credit agency Finnvera and the Brazilian development bank BNDES. LF

WINNER: Fibria

Issuer: Fibria

Finance Type/ Size: $400m upsize to trade finance loan

Supporting Banks: BNP Paribas, Natixis

Law Firms: White & Case, Hughes Hubbard, Souza Cescon, Schoenherr, Cerha Hempel Spiegelfeld Hlawati