17 de diciembre de 2014 / 13:17 / en 3 años

Brazil's Cielo to issue debt to pay for stake in card venture

SAO PAULO, Dec 17 (Reuters) - Cielo SA, Brazil’s largest card payment processor, agreed on Wednesday to issue 3.46 billion reais ($1.27 billion) in local debt to pay for the purchase of a 70 percent stake in a card joint venture with state-controlled lender Banco do Brasil SA.

The board of Barueri, Brazil-based Cielo approved the sale of the step-up coupon, real-denominated notes on a private placement, according to a securities filing. Step-up coupon notes pay an initial fixed interest rate for a first period, and then a higher rate through maturity.

The placement of the notes, which will mature in December 2023, remains subject to the implementation of an 11.6 billion-real card processing venture between Cielo and Banco do Brasil, which was announced last month. Under terms of the deal, Cielo will handle the card processing activities of Banco do Brasil’s Arranjo Ourocard unit.

Cielo will partially fund the purchase of its 70 percent stake in the venture through the issuance of the notes, a move that should double the company’s debt. In a call after the deal was announced, executives at Cielo explained that Banco do Brasil would be the recipient of the notes.

Cielo will offer 2.359 billion reais of notes in the first portion, offering to pay interest equivalent to 100 percent of Brazil’s benchmark CDI interbank offered rate through March 2015. The rate will rise to the equivalent of 111 percent from that date through maturity.

The other two portions, worth 700 million reais and 400 million reais, respectively, will pay similar interest. The CDI is currently at an annual 11.60 percent.

Shares of Cielo shed 0.2 percent to 39.81 reais on Wednesday. (Reporting by Guillermo Parra-Bernal Editing by W Simon)

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