(Corrects title of Marcelo Castelli to CEO in 1st paragraph)
By Paul Kilby
NEW YORK, Dec 2 (IFR) - Fibria is eyeing M&A options following a multi-year turnaround that has put the Brazilian pulp company firmly in high-grade territory, CEO Marcelo Castelli said in New York on Wednesday.
“We are bigger, stronger and more competitive,” said Castelli at a Fibria Day event in New York. “(M&A) rumors in the market increasingly involve Fibria. We have turned the company around so this is music to the ears of the shareholders.”
J&F, the owner of meat producer JBS and pulp company Eldorado, reportedly denied earlier this year that it was negotiating a purchase of Fibria - now the world’s largest producer of market pulp.
Castelli expects any possible transaction to be a merger rather than a full blown acquisition, but noted that the company has market access should it require funding.
”It is more of a big ‘M’ and a little ‘a,’ said Castelli. “If we need to access the bond market for acquisitions or different projects we are ok with that.”
Fibria has been one of the few positive stories in a sea of distressed credits in Brazil where a economic recession and a widespread corruption scandal has sent spreads wider.
Just last month Moody’s became the last of three rating agencies to award an investment-grade rating to a company that has brought its leverage down to 2.9 times this year from a peak of 6.1 times in 2011.
In the last quarter net debt to Ebitda fell to just 1.58 times, and according to analysts, it should settle around 2 times after accounting for recent debt issues.
With a G-spread of 308bp on its 2024s, the company, rated Baa3/BBB-/BBB-, has one of the tightest, if not the tightest, secondary levels in the Brazilian corporate bond complex.
That compares to the 353bp G-spread on the 2024s issued by Brazilian food company BRF, which is rated Baa2/BBB/BBB.
For now, the issuer has no plans to tap the international capital markets after having raised about US$2bn for an expansion project called Tres Lagoas.
With the exception of a syndicated pre-export facility, Fibria largely lent on the local markets and one of its principal shareholders development bank BNDES for financing the US$2bn. “The blended cost of these transactions in dollar terms was 2% for a 6.5 year tenor,” said CFO Guilherme Cavalcanti.
“It is very cheap funding and that means that strong cash flows can be used for other purposes like paying dividends and investing in new businesses.” (Reporting By Paul Kilby; Editing by Shankar Ramakrishnan)