8 de mayo de 2015 / 14:38 / en 3 años

Votorantim Cimentos breaks Brazilian issuance lull

NEW YORK, May 8 (IFR) - Votorantim Cimentos proved Thursday that Brazilian issuers once again have access to international debt capital markets, raising 500m in seven-year bonds and breaking an uneasy six-month primary market lull for the nation’s issuers.

The cement company’s journey to the markets began in earnest in late April after Petrobras removed a nasty overhang over Brazilian bonds by bringing out full-year audited results.

Petrobras’s release of a clean sheet of results eliminated the threat of a technical default at the state-owned oil company and immediately sparked a rally in Brazilian credit.

Votorantim waited for the dust to settle before embarking on European roadshows, culminating in the trade last Thursday. But it still faced some significant headwinds.

The trade came against a tougher backdrop than expected - German bond yields experienced their largest weekly rise since mid-1999 - on the day of pricing.

Votorantim, rated Baa3/BBB/BBB, may have raised what it had intended, but some thought it paid too much for access and could probably have done better in US dollars.

The bonds launched at 310bp over the interpolated mid-swaps curve, or flat to earlier guidance, after leads watched demand reach a tepid 620m plus. Final pricing came at 98.542 with a 3.5% coupon to yield 3.737%, providing a 30bp pick-up to its existing euro-denominated 2021s, which were trading with a Z-spread of 283bp.

At 310bp over mid-swaps, the deal came at three-month dollar Libor plus 380bp, or some 80bp wide to the Libor plus 290bp-300bp that the company could have achieved on a new seven-year in US dollars, according to a syndicate manager.

“Net-net they have paid 80bp to get this trade done,” he said. “It is easier to access dollars than euros for Brazilian companies. There is more liquidity and the investor base understand the country’s fundamentals a lot more.”


It may have been an expensive test, but some bankers said Votorantim’s deal is likely to encourage other Brazilian issuers to consider issuing debt before a possible US rate hike this year.

“There are a lot of Brazilian companies seriously looking at accessing the market,” said a banker at a Brazilian financial institution. “These guys didn’t have a chance of coming in the first quarter, and now there is more credible evidence that US rates will go higher.”

The country’s last cross-border bond sale came in November 2014 when RioPrevidencia, the state of Rio de Janeiro’s public pension fund, braved what was already a tough market to price US$1.1bn in 2027 bonds.

The list of potential issuers could include the sovereign which has long been rumoured to be preparing a strategic dollar foray that would make a decisive statement about the country’s renewed access to the capital markets.

“The good news is that the market has reopened [for Brazilian issuers], but everyone is still waiting for the sovereign to make the first move in the dollar market,” said a DCM banker.

The sovereign may have squandered an opportunity last month, however. Its benchmark 4.25% 2025s were around 98.50 last Thursday versus 101.125 on April 24 - the day after Petrobras published its financials. At that level, a tap of its key benchmark bond may prove difficult.

“You could have clearly tapped [the 2025] above par but now at 98.50 OID limits come into play,” said a second DCM banker.

A version of this story will appear in the May 9 edition of IFR Magazine, a Thomson Reuters publication (Reporting By Paul Kilby; Editing by Shankar Ramakrishnan, Matthew Davies)

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