IFR Magazine – January 20, 2018

to stay away from the trade, opting instead
to wait for further issuance from the
corporate space, which has been particularly
busy this year.
Petrobras, the state-controlled oil
company, is also heard to be preparing a
bond deal soon.
“They are pricing (the sovereign deal)
right, but I want to keep my power dry for
the corporates,” said Ray Zucaro, chief
INVESTMENTûOFlCERûATû268û!SSETû
Management.
The deal comes just a week after S&P
downgraded Brazil a notch to BB-, a move
that has had a minimal impact on the
country’s secondary debt levels. The
sovereign’s other ratings are Ba2 and BB.
And while the back-up in rates may have
moved bond prices lower, spreads have
remained steady or even tightened.
“The bonds haven’t moved much on the
back of the downgrade. If you have already
GIVENûUPûONûPENSIONûREFORMûYOUûlGUREDûTHATû
S&P would downgrade,” said the banker.
“What is going to matter is how the
presidential election (in October) will shape
up, but there is still a couple of months
before people have views (on candidates).”
With the presidential race still wide open,
January 24 is being seen as a crucial date as
that is when a court will decide on an appeal
by former President Luiz Inacio Lula da
Silva.
A positive outcome for the popular leftist
leader could possibly open the way for him
to run for the presidency - a worst-case
outcome for the markets.
“We think the dynamic in Brazil remains
volatile to say the least given that things still
depend on whether Lula will remain a factor
(or not),” said Newman.
Political risk notwithstanding many on
the buyside remain optimistic about the
prospects for the region’s largest economy.
“Leaving the election aside, all the hard
data shows that Brazil has left the recession
they have been in the past three to four
years,” said a portfolio manager at a hedge
fund.
“This year the economy will
conservatively grow at 3%, which is
phenomenal.”
Issuers are being encouraged to move
sooner rather than later.

“Issuers are trying to get in ahead of the

summer,” said the portfolio manager. “After

that you are getting into election mode.”

HIDROVIAS DRAWS CROWD FOR

DEBUT BOND

HIDROVIAS DO BRASIL priced a US$600m seven-

year non-call four bond last week after

generating considerable investor interest for

its debut bond.

Leads moved the deal from the waterway

logistics company from initial price

thoughts of low-to-mid 6% to price the trade

at par to yield 5.95%.

Order books peaked at US$4.2bn before

falling back to US$3.8bn, according to one

investor looking at the trade.

Strong demand underscores the bid for

Brazilian assets despite S&P’s decision last

week to downgrade the country’s rating to

BB- from BB.

“A lot of deals have wallowed in the

secondary,” said a banker away from the

deal. “But deploying cash is still a big

priority for investors who are more focused

on getting allocations than complaining

about the last 5bp-10bp.”

With a string of Brazilian logistics and

transportation companies hitting the

market of late, investors looking at

Hidrovias had more than their fair share of

comps.

!TûTHEûlNALûYIELDûTHEûISSUERûOFFEREDûAû

slight pick-up to rail transportation name

Rumo - whose recently issued 5.875% 2025s

(rated B+/BB-) were trading at around 5.79%.

But it was still considerably wide to BB

rated JSL, another logistics credit whose

7.75% 2024s were being quoted as tight as

6.65%.

“JSL is more trucking and more tied to the

domestic economy, while Rumo and

Hidrovias are more tied to exports,” said the

banker.

Hidrovias (Ba3/BB) has been pitching the

relative cheapness of transporting

commodities on water versus by truck and

rail.

While investors sometimes spurn private

EQUITY

BACKEDûlRMSûSOMEûDREWûCOMFORTû

from Hidrovias’ shareholder base, which

includes Blackstone and Singapore

sovereign wealth fund Temasek.

“The industry has a long track record of

volatility, but it is an interesting

infrastructure play with good shareholders,”

said one investor.

Proceeds will help pay down project and

secured loans, and the deal carries a

mandatory redemption if those loans are

not repaid after 120 days, according to an

investor presentation seen by IFR.

The company plans to have 80% of its debt

unsecured, as opposed to 5% before this

trade.

,EVERAGEûHASûFALLENûRAPIDLYûASûCASHmOWSû

have risen following the company’s R$1.7bn

(US$529m) capex programme.

Fitch calculates net leverage at 4.3 times

ASûOFû$ECEMBERûûVERSUSûûTIMESûINû

2016.

Net interest coverage is also improving

and is expected to jump to 3 times between

2017-2019 compared with just 0.9 time in

2016, the ratings agency said.

Bank of America Merrill Lynch, Itau and

Morgan Stanley were global coordinators, as

well as joint bookrunners along with BB

Securities and Santander.

NATURA PREPS DEBUT DOLLAR BOND

Beauty products company NATURA COSMETICOS

(Natura) has kicked off marketing for a

debut 144A/Reg S US dollar bond.

The borrower, rated BB/BB, will visit

accounts in London, Los Angeles, Boston and

New York on January 22-24.

Bradesco BBI, Citigroup, HSBC and Itau BBA

have been mandated to arrange the

meetings.

MEXICO

CREDITO REAL LINING UP SWISS DEAL

CREDITO REALûAûLEADINGûSPECIALTYûlNANCEû

company in Mexico, is eyeing a Swiss franc

bond.

The company, which also has a presence

in the US and Central America, has

mandated Credit Suisse as sole bookrunner

to arrange investor meetings in Switzerland

starting on January 25.

Credito Real is rated BB+ by both S&P and

Fitch,

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