29 de mayo de 2015 / 19:04 / en 2 años

Brazil's BRF makes successful debut despite shaky backdrop

NEW YORK, May 29 (IFR) - Brazilian food company BRF’s debut euro bond topped off a slow week in the Latin American primary markets.

A rally in US rates Friday and a rebound in oil prices Friday as the US dollar sunk set a positive backdrop for the region and EM overall, but investors remain risk averse.

“A lower dollar and rallying US rates are good for emerging markets, but sentiment remains shaky,” said a New York-based syndicate official.

Investors also seem to be holding judgment on Brazil following data that showed a 0.2% drop in first quarter growth and a larger 1.6% decline year on year.

While those numbers were better than some expectations, the outlook for the region’s largest economy looks dim amid monetary and fiscal tightening.

“We believe the outlook for growth in Brazil remains quite bleak: the fiscal consolidation is already showing its impact on activity, and we believe that the Copom strategy for monetary policy will hurt growth conditions even further,” said Barclays.

This follows BRF’s debut in the euro market on Friday - a 500m seven-year bond that saw demand peak at more than 2bn.

Starting with initial price thoughts of the mid-swaps plus 240bp area, the issuer was able to squeeze guidance to plus 230bp (+/-5bp) before pricing the 2.75% seven-year at 99.548 to yield 2.822%, or mid-swaps plus 225bp.

One banker put final pricing some 25bp-30bp wide to a theoretical seven-year dollar bond, but thought that such levels were to be expected from an inaugural trade in euros.

European accounts appeared to be willing participants in BRF’s deal and shrugged off news earlier this week that Russia would ban pork exports from one of its plants.

By generating a good chunk of its revenues abroad, BRF - the world’s largest poultry producer - has been a beneficiary of a weaker Real.

Export revenues have also protected BRF from flagging economic growth in Brazil, where it is also one of the largest food companies.

Leverage also remains low, with Fitch expecting net leverage to remain near 0.5x this year, depending on dividends and share buybacks.

With three issuers preparing deals, next week is likely to be busy in the primary markets, though leads will have to navigate several potential market-moving events.

ECB meets on Wednesday, while US non-farm payrolls are scheduled to be released Friday. Greece, which has become an increasing concern to the markets, is also due to make a debt payment to the IMF on June 5.

“It is a full week, but this shouldn’t prevent deals from being announced,” said an EM focused syndicate official.


LatAm Airlines is marketing a potential senior unsecured bond offering. The company was in Los Angeles today and will head to New York on June 1 and 2, leaving June 3 open for conference calls.

Ratings are Ba2/BB/BB- by Moody‘s, S&P and Fitch. The deal is being done in conjunction with a tender offer and consent solicitation for US$300m in outstanding 9.50% 2020s issued by TAM.

Citigroup and JP Morgan are acting as global coordinators as well as joint bookrunners along with Bank of America Merrill Lynch, BTG Pactual, Credit Agricole and Santander.

Mexico’s Comision Federal de Electricidad (CFE) has selected BBVA, Bank of America Merrill Lynch, Citigroup, Goldman Sachs, HSBC, Morgan Stanley and Scotiabank to organize the fixed-income investor meetings.

The borrower, rated Baa1/BBB+/BBB+, was in Los Angeles today and will head to London on June 1, Boston on June 2 and New York on June 3.

Brazilian aircraft manufacturer Embraer, rated Baa3/BBB, has mandated Citigroup and Morgan Stanley to meet fixed-income investors ahead of a potential SEC registered bond offering.

The company was in Los Angeles and London today and will head to Boston and Chicago on June 1 and in New York on June 2. (Reporting By Paul Kilby; editing by Shankar Ramakrishnan)

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