October 19, 2016 / 5:41 AM / 2 years ago

Brazil water company Sanepar files to sell new, existing stock

RIO DE JANEIRO, Oct 19 (Reuters) - Brazilian water and sewage utility Sanepar asked for permission to sell new and existing stock, the company said late Tuesday, a sale designed to raise money for its controlling shareholder, Brazil’s Parana state, and finance expansion.

The sale is expected to raise about 1.5 billion reais ($471 million) and be one of the biggest stock offerings in Brazil this year, the Valor Economico newspaper reported Sept 27.

Cia de Saneamento do Parana, as Sanepar is formally known, did not say how many shares it expected to sell, nor how much it expected to raise in a securities filing announcing the sale request. After the sale, Parana’s government will retain voting control of Sanepar, the statement said.

The Sanepar sale comes as Brazil’s federal, state and local governments struggle with the country’s deepest recession in decades and seek ways to cut debt while attracting investment for expansion of public services. The slowdown was brought on by the end of a commodities boom and the collapse in the price of key Brazilian exports.

Graft and political manipulation of markets have undermined the finances of many of state-led companies and utilities that form the backbone of the world’s seventh-largest economy, such as state-led oil firm Petrobras, utility holding company Eletrobras and airport operator Infraero.

Like Sanepar, state-owned and controlled companies are seeking ways to raise capital, either through asset sales or stock offerings. With the federal government budget deficit expected to surpass 10 percent of gross domestic product this year, President Michel Temer is seeking to pass a constitutional amendment limiting annual spending increases to the inflation rate for 20 years.

In addition to new non-voting preferred shares, the Sanepar offer seeks to sell existing preferred shares owned by Parana state and other key stake holders, such as construction company Andrade Gutierrez , as well as shares controlled by the investment arm of Brazil’s state-owned bank Caixa Economica Federal.

Banco Bradesco SA, Banco BTG Pactual SA , Banco Itau BBA SA [BIHFIU.UL and Banco Votorantim SA have been hired as coordinators of the sale, Sanepar said.

$1 = 3.1849 Brazilian reais Reporting by Jeb Blount; Editing by Kenneth Maxwell

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