Spain’s Aena to run Brazil’s crown jewel airport Congonhas

Lot with airport in São Paulo and other 10 was auctioned for R$2.45bn; Aena was the only interested buyer

08/19/2022

Main lot includes São Paulo’s Congonhas airport and 10 others in Mato Grosso do Sul, Minas Gerais, and Pará — Foto: Edilson Dantas/Agência O Globo

Main lot includes São Paulo’s Congonhas airport and 10 others in Mato Grosso do Sul, Minas Gerais, and Pará — Foto: Edilson Dantas/Agência O Globo

Brazil’s new round of airport auctions had little competition and was market by XP Asset’s debut in the industry. The main lot, which includes São Paulo’s Congonhas airport and 10 others in Mato Grosso do Sul, Minas Gerais, and Pará, was won by the Spanish company Aena. Despite the lack of competitors, Aena placed a bid of R$2.45 billion, or 231.02% over the minimum price.

Besides this initial payment, variable payments are foreseen throughout the contract, equivalent to a percentage of the gross revenue, which will reach 16.15% as of the ninth year of the concession.

Capital expenditure of R$5.9 billion is foreseen in the lot, in a 30-year concession. According to the feasibility studies, the forecast for passenger traffic in the lot in 2023 is 24.7 million. The projection for 2052 is 37.5 million passengers.

Besides crown jewel airport Congonhas, the lot includes the airports of Campo Grande, Corumbá, and Ponta Porã, in Mato Grosso do Sul; Santarém, Marabá, Parauapebas, and Altamira, in Pará; Uberlândia, Uberaba, and Montes Claros, in Minas Gerais.

Aena joined the Brazilian market by winning an auction to operate six airports in the Northeast region in 2019 – with fierce competition at that time. Today, the company operates terminals in Recife (Pernambuco), Maceió (Alagoas), João Pessoa (Paraíba), Aracaju (Sergipe), Juazeiro do Norte (Ceará), and Campina Grande (Paraíba). The company plans to reach an investment figure of R$1.4 billion by the end of 2023 in these assets. Globally, the group operates 46 airports in Spain (including Barajas, in Madrid), one in the United Kingdom (London-Luton), 12 in Mexico, two in Colombia, and two in Jamaica.

The operator is controlled by the Spanish government, which holds a 51% stake. The remaining shares are traded on the stock exchange.

In the business aviation lot, the winner was the infrastructure fund XP Infra IV FIP, which took the airports of Campo de Marte, in São Paulo, and Jacarepaguá, in Rio de Janeiro. The group, which was the only interested buyer, placed a bid of R$141.4 million for fixed concession payment, the minimum amount foreseen in the call for bids.

The move meant the entry of XP Asset into the industry. The asset management company signed a partnership with the French company Egis, which had already participated – not very successfully – in the airport concessions market in Brazil. The company holds a 2.94% stake in Aeroportos Brasil Viracopos, which controls the airport of Campinas (São Paulo), together with companies Triunfo and UTC. Today, the contract is on its way to being returned amid a turbulent process. In January this year, the French group was joined by the fund Tikehau Capital, which holds now a 40% stake. The French state-owned company Caisse des Dépôts, which previously held control of the company, now holds 34%. The remaining 26% portion is held by executives and employees.

The only lot that attracted competition was the North one, which includes the airports of Belém (Pará) and Macapá (Amapá) and foresees investments of R$875 million in construction works. The Novo Norte consortium (Socicam and Dix Empreendimentos) won the bidding, after a long dispute through an open outcry auction. The company offered a fixed concession payment of R$125 million, or 119.78% more than the minimum value defined in the call for bids.

The company beat Vinci Airports, which offered R$115 million, or 102.19% more than the minimum value.

The 30-year contract foresees a capital expenditure of R$875 million. Besides the fixed concession payment offered in the auction, there will be variable fees starting in the fifth year of the concession. The percentage will reach 7.09% starting in the ninth year of the contract.

The airports included in the lot are expected to draw 4 million passengers in 2023. Passenger traffic is projected at 9 million in 2052, according to feasibility studies.

Socicam, which runs bus terminals, has started operating smaller airports in recent years and today controls 24 facilities in seven states. Pernambuco-based Dix Empreendimentos is already working in partnership with Socicam in the concession of 11 regional airports in São Paulo, won at an auction last year.

*By Taís Hirata — São Paulo

Source: Valor International

https://valorinternational.globo.com/
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Central Bank president rules out new term

Monetary authority’s autonomy law foresees fixed four-year terms for president and directors with one reappointment

08/19/2022

Roberto Campos Neto — Foto: Billy Boss/Câmara dos Deputados

Roberto Campos Neto — Foto: Billy Boss/Câmara dos Deputados

Central Bank President Roberto Campos Neto said he will not accept a new term after 2024. “When the autonomy rule was made, I was against reappointment. I wanted to remove it from the bill,” he said Thursday at an event held by BTG Pactual.

“I think that it is not healthy because it creates fragility in the middle of the term because there will be a Central Bank president interested in being reappointed who will be exposed at that moment to the will of the Executive branch. Other countries go through this, and I don’t like it, I don’t think it is good. So the answer to the question is I do not [want it].”

The Central Bank’s autonomy law provides for fixed four-year terms for the president and directors, with one reappointment. Thus, Mr. Campos Neto must hold the post until the end of 2024 and could have the term extended until 2028.

In the event, Mr. Campos Neto made it clear that the change in the monetary authority’s focus on inflation over the relevant horizon will not be permanent. According to him, when uncertainty decreases, the policymakers will go back to considering the full-year index.

In its last decision, the Central Bank’s Monetary Policy Committee (Copom) emphasized the 12-month inflation in the first quarter of 2024, projected at 3.5%, and not the full-year index. According to the statement, the period “reflects the relevant horizon, smoothens out the primary effects from tax changes, but incorporates their second-round effects on the relevant inflation projections for monetary policy decisions.”

Mr. Campos Neto stressed that calibrating the Copom’s statements is the main challenge in an uncertain environment. “We have different estimates [in the market] about how much [of the government’s tax cut] was going into the following year. In the time dimension, everyone was sure it would come back in the first quarter [of 2024]. We found it easier to act on the when,” he said.

The central banker highlighted, however, that this is a one-off change and does not mean a change in the “inflation target.” “We made it clear that we are talking about the relevant horizon and not the target. We had to adapt our reaction function. It is not permanent, it is temporary,” he said.

Mr. Campos Neto also said that Brazil is the only country where the market is pricing a drop in interest rates. “It means that agents understand that much of the [monetary policy] work has been done.”

The executive highlighted that inflation is still quite pressured in Brazil, but that the regulated price index shows the impact of the government’s measures, which reduces prices in the short term. “Food at home is still high and so are services,” he said.

In his view, the tax cuts this year should generate inertia for the coming years, but it is necessary to “understand what is structural.” “We are starting to see better news [on inflation], as in the diffusion part. We think that there is inertia for next year, but there is uncertainty,” he said.

As for the economic activity, he emphasized that the market has revised upwards the projection for this year due to the government’s expansionary policy, but also due to the better-than-expected performance of some sectors. “Our projection is a little above 2%, it should come out soon,” he said. In the most recent quarterly inflation report, the Central Bank estimated a growth of 1.7%, and this figure will be revised in the September document.

*By Larissa Garcia — Brasília

Source: Valor International

https://valorinternational.globo.com/
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Wheat likely to remain in Brazil due to high prices

Prices estimated for December show that Brazilian wheat will be among the most expensive in the world

08/18/2022

Even with the prospect of a record wheat harvest and supply problems in the Northern Hemisphere, Brazil is unlikely to gain ground in the international market. This is because the prices estimated for December – when the current crop will have been harvested – show that Brazilian wheat will be among the most expensive in the world. This scenario seems bad for exporters, but does not bring tranquility to the domestic market either.

A study by consultancy T&F shows that the estimated price for Rio Grande do Sul wheat in December is R$102 a bag, while the FOB price (arriving at the Port of Rio Grande) will reach $385 a tonne, taking into account transportation costs and the foreign exchange rate at R$5.08 to the dollar. Luiz Carlos Pacheco, an analyst and partner at T&F, said that, at this price, the Brazilian wheat would reach Algeria, which is a major buyer, at $465 a tonne, above the prices of wheat produced by Argentina ($450), Canada ($416), United States (durum, $408), France ($383), and Russia ($315).

“This means that, in order to export, the price paid to the farmer should be R$88 a bag, something unimaginable given the high production costs,” he said. Therefore, the large Brazilian harvest, estimated by the National Supply Company (Conab) at more than 9.2 million tonnes, should be almost fully distributed in the domestic market.

Despite the larger harvest, Mr. Pacheco does not see a sharp drop in the prices of wheat and its products in Brazil. “It’s off-season now, so it would be natural for prices to rise and then fall again as of October. But farmers are flush with cash and I don’t see any of them interested in getting rid of their production at the current price,” he said.

At the same time, the mills accelerated their work until April and May in view of the strong demand and the war in Ukraine and managed to supply wholesalers and retailers. “It seems that everyone is overstocked, which would clearly indicate falling prices. But this is not happening because costs have gone up so much and margins have become so tight that no one wants to negotiate at lower prices,” he said.

Daniel Kummel, the head of Paraná’s wheat industry union (Sinditrigo-PR), said that the Brazilian grain market has always been detached from the Chicago exchange, which is the international benchmark. But after the Covid-19 pandemic and the war in Ukraine, there is a 90% correlation. “We started to export and that took us to the international market,” he said.

According to him, whose trade union represents 67 mills in the state, companies are really stocked up and working far from total capacity to wait for information about the harvest. “A cold front, with frost, as is forecast for next week, can compromise the Paraná harvest and hold up prices,” he said. “The mills are waiting to close new contracts with doubts about demand, costs, and prices.”

The only hope for any drop in wheat prices in the domestic market is the arrival of the summer harvest and the impossibility of producers to store soybeans and corn where the grain is. “Supply or demand will not bring down prices. Farmers will,” the analyst said.

Considering the prices that reach consumers, wheat rose 27.47% in the year to July, while baked goods including breads, cakes, and cookies saw an increase of 15.54%.

Wheat crop in Paraná: production costs help keep price high — Foto: Dirceu Portugal/Fotoarena/Agência O Globo

Wheat crop in Paraná: production costs help keep price high — Foto: Dirceu Portugal/Fotoarena/Agência O Globo

*By Fernanda Pressinott — São Paulo

Source: Valor International

https://valorinternational.globo.com/
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Partnership of Equipav, Perfin goes beyond Minas Gerais

Consortium, which won its second concession in Minas Gerais, plans to study new assets

08/18/2022

Equipav, a group with interests in a range of sectors including infrastructure and mining, and asset management company Perfin plan to develop together a highway concession platform in Brazil. The partnership started with two concessions in Minas Gerais, but there are plans to study new assets.

The consortium formed by the two companies won on Wednesday the auction to build the Sul de Minas lot through a public-private partnership (PPP). Last week, the group had already won a road concession in the region known as Triângulo Mineiro. The idea is that, from now on, the partnership will be consolidated, said José Carlos Cassaniga, director at Equipav Rodovias.

“The idea is that Equipav and Perfin will now look at the road concession industry together, on this platform, with a qualified look, and with capital discipline. This is our purpose,” he said. “It is a partnership that complements each other.”, he said.

In the auction of the Sul de Minas Lot, the consortium beat the offer of its only competitor, Monte Rodovias, after an open outcry auction. It ended with a final ended with a proposal of R$378 million, or a discount of 14% over the maximum payment defined in the public notice.

The lot includes 454.3 kilometers of roads. The estimated investment is R$2.3 billion, and operating expenses are estimated at R$2.3 billion more over the 30-year contract period. The Triângulo Mineiro Lot, won last week in a non-competitive auction, includes 627 km of roads and foresees R$3.2 billion in construction work.

The two lots will allow some synergies in the administrative field and contract management, Mr. Cassaniga said. “It is the same regulation, the same government.”

The auctions mark the debut of Equipav and Perfin in the highway sector. Equipav is a shareholder of Aegea Saneamento and has worked in highways in the past. Perfin was already active in the infrastructure sector, but the areas of electricity and basic sanitation. The asset management company has more than R$23 billion under management, of which about R$6 billion are allocated to infrastructure funds.

The auction ends the sequence of three road auctions started last week by the Minas Gerais government. In addition to the two lots, the Belo Horizonte beltway was auctioned – and won by the Italian company INC.

By the end of this year, the Minas Gerais government plans to launch other concession projects, said Fernando Marcato, the state’s infrastructure, and mobility secretary.

One concession is that of the Belo Horizonte subway, to be held in partnership with the federal government. The secretary said he will be in Brasília on Thursday to meet Federal Court of Accounts (TCU) members Vital do Rêgo (rapporteur of the auction process) and Antônio Anastasia. “There is already a favorable opinion from TCU officials. If the court greenlights the project, and we expect it to do so, we can launch [the bidding] later this year, maybe in a month,” he said.

In the segment of highways, the government is working on three other projects. One of them, the BR-356, which will link Belo Horizonte and Ouro Preto, will require a public contribution. The funds may be unlocked by the compensation agreement being negotiated between the state and mining company Vale linked to the damage caused by the Mariana dam collapse.

There are still four other lots being structured in partnership with the Brazilian Development Bank (BNDES). Investment values will be updated accordingly to the new input inflation scenario. The big challenge, according to the secretary, is in drawing investors.

*By Taís Hirata — São Paulo

Source: Valor International

https://valorinternational.globo.com/
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Ultra will put house in order before returning to growth

Company mulls deals in renewable power; CEO Marcos Lutz says operational efficiency is a priority

18/08/2022

Marcos Lutz — Foto: Claudio Belli/Valor

Marcos Lutz — Foto: Claudio Belli/Valor

Grupo Ultra, one of the largest companies in Brazil, will focus on putting its house in order and then return to growth after raising about R$8.5 billion by selling two of its main businesses. The highly anticipated arrival of CEO Marcos Lutz is seen by the market as the turning point for the group that owns the gas station chain Ipiranga, LPG distribution company Ultragaz, and liquid bulk storage company Ultracargo.

For those betting on a more aggressive expansion drive, however, Mr. Lutz said efforts are concentrated on management and process improvement for now. “The goal is to end 2022 with better operational efficiency than at the beginning of the year,” the executive told Valor in his first interview after taking office.

He returned to the group last year as a shareholder in the company’s controlling group and joined Ultra’s board of directors in April 2021. Next year, he will replace Pedro Wongtschowski as the company’s chair.

Large mergers and acquisitions are not in the group’s plans for now. This does not mean Ultra is not analyzing business opportunities. The group is capitalized after selling, in recent months, its pharmaceutical retail division Extrafarma, the specialty chemicals business Oxiteno, and a 50% stake in the electronic toll collection company ConectCar.

The group is in talks over a potential partnership with a renewable power company through Ultragaz, sources say. Ultra still has a small operation in this segment with the sale of retail power in two states.

Mr. Lutz declined to comment on possible expansion moves through acquisitions. The company plans to get back into the M&A game later on, with the confidence that the balance sheet is strong enough to absorb potential deals.

The executive says there is also room for the arrival of partners in current operations or new businesses, but would not say if there are talks underway. “In the future, I see the group having partners in businesses that create value beyond the financial value,” he said.

In the executive’s view, the three current businesses – infrastructure and logistics (Ultracargo), energy (Ultragaz), and fuel distribution (Ipiranga) – still offer growth possibilities. It would make sense for Ultragaz, for instance, to join the power commercialization market, benefiting from the LPG company’s robust customer base.

The refineries put up for sale by Petrobras are not totally out of the plans, but there is much work to be done internally, especially at Ipiranga, before seeking large deals, the executive said. Ultra was very close to buying Refinery Alberto Pasqualini (Refap), in Rio Grande do Sul. Mr. Lutz said that Ultra analyzed the assets of the petrochemical company Braskem as well, but the return on capital was not so attractive.

With irregular performance in recent years, the fuel distribution company is the group’s largest business, and also its Achilles’ heel. Because of inadequate supply and pricing strategies in the past, Ipiranga is behind its main competitors Vibra (formerly BR Distribuidora) and Raízen (a joint venture between Cosan and Shell) in terms of margins. The Covid-19 pandemic, which brought down the demand for fuels, widened the gap.

The recovery trajectory has already started and the group projects that this gap will be bridged by the end of the year. Analysts covering the group, however, believe that this work may take longer and continue in 2023.

The executive acknowledged that it is necessary to deal with the natural anxiety of investors for the long-awaited turnaround of the group. “There is a lot of questioning about what opportunity is going to emerge. Refinery is not an object of desire, but an opportunity,” he said.

“You have to separate shareholders into two categories: those who think more in the short term (stock market investors) and those who think in the long term (of the controlling group),” he said. According to him, the shareholders of the company’s controlling group want operational quality, support inorganic expansion, and are somewhat conservative. In his view, Pátria, a fund that is a partner in the company and is also in the controlling group, is in the middle of the road. “They seek operational efficiency, but [support] projects that create value,” he said.

Mr. Lutz said he has not faced resistance from the oldest shareholders in the group – which is about to turn 85. “There is a process of [management] change indeed, but there is no resistance. I was raised here, I started as a trainee and was a manager at Ultracargo.”

After leaving Ultra, Mr. Lutz went to CSN, owned by Benjamin Steinbruch, and then was one of the main executives of the Cosan group, owned by Rubens Ometto Silveira Mello. While in Cosan, Mr. Lutz led important changes in the company, which was originally a sugar-and-ethanol company, and later became one of the largest fuel distributors in the country and an infrastructure company.

With the return of Mr. Lutz as a shareholder and CEO since earlier this year, the market expected that he would start a revolution. And high interest rates in Brazil mean a tailwind for the company’s short-term strategy, in his view.

With rising rates, it is not bad to be deleveraged, Mr. Lutz said. In June, leverage measured by the net debt-to-EBITDA ratio had already dropped to 2.2 times, compared with 3.1 times in the previous quarter, thanks to the proceeds from the sale of Oxiteno and the better operating result.

“After such a deleveraging, we will discuss the group’s pipeline,” he said. The proceeds from the sale of assets, which account for more than half of the group’s current market capitalization of just over R$15 billion, were expected to finance the strategy of focusing on the energy and infrastructure sectors and the purchase of Refap. As the deal with Petrobras fell apart, the funds will be partly directed to reduce indebtedness.

UBS has a positive view of Ultrapar, which has become “a new company after the sales of Oxiteno and Extrafarma and by completing the succession planning,” UBS analysts Luiz Carvalho, Matheus Enfeldt, and Tasso Vasconcellos wrote in a report this week.

According to the bank, the next step is the election of the new board of directors, in April, to prepare the group for the next two years. “The composition of the board is key to provide the necessary support for the capital allocation journey and potential diversification that will follow,” they highlighted. UBS has a buy recommendation for the company, with a target price of R$18 in 12 months. The company was traded at R$13.7 on Wednesday’s close.

According to the original plans, Mr. Lutz would not take over the company. “I didn’t come to Ultra to be CEO. I came to be a partner, that was the initial invitation,” he said. No eye like the master’s eye.

*By Stella Fontes, Ivo Ribeiro, Mônica Scaramuzzo — São Paulo

Source: Valor International

https://valorinternational.globo.com/
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New generation of Covid vaccines may arrive in Brazil shortly

Moderna, Pfizer offer shots to fight both original virus and omicron variant

18/08/2022

U.S.-based drugmaker Moderna and Zodiac, its partner in Brazil, started March contacts with health regulator Anvisa with the intention of making a new vaccine available in the country at the beginning of 2023. Pfizer is also working to bring to the Brazilian market its shots with updated formula and expects to file a request for authorization with Anvisa this month.

The two laboratories have developed for the global market the so-called bivalent vaccine, designed to attack the omicron variant, which has become dominant in several countries including Brazil, and also to tackle the original strain of the coronavirus. So far, all vaccines used in the world are based only on the original strain. The bivalent shot, however, promises to be more effective.

This week, the United Kingdom became the first country to approve Moderna’s bivalent vaccine for use as a booster dose as autumn approaches in the Northern Hemisphere. The company’s new shot is being reviewed by health authorities in the United States, Canada, Australia, and in European and Latin American countries.

Moderna and Pfizer work with messenger RNA technology. Unlike the technology that inoculates the attenuated or inactivated virus into the body, they “teach” the body to synthesize a protein that stimulates the immune system to respond to the virus. This technology also allows vaccines to be updated more quickly.

Pfizer’s conventional Covid vaccine has already been used in Brazil since last year, as have those from AstraZeneca, Janssen, and Sinovac/Butantan. Pfizer’s bivalent vaccine would therefore mark the second stage in the company’s activities in Brazil to fight Covid-19.

In Moderna’s case, once the company has Anvisa’s approval to commercialize its Spikevax Bivalent vaccine, it will be its debut in the Brazilian market.

To operate in Latin American countries, Moderna signed in February a partnership with the Uruguay-based pharmaceutical group Adium. By the agreement, Adium became Moderna’s operational arm in the region, responsible for the registration request with the health authorities, for the logistics, for the information work to physicians, and for the dialogue with the health ministries. In Brazil, the operation is run by Adium’s subsidiary, Zodiac — which has been operating in the country for 31 years.

Alexandre Seraphim — Foto: Silvia Zamboni/Valor

Alexandre Seraphim — Foto: Silvia Zamboni/Valor

“We are moving fast. It is a very complex process that involves state-of-the-art technology. Anvisa is one of the best regulatory agencies in the world and, therefore, a very demanding one,” Alexandre Seraphim, general manager of Zodiac in Brazil, told Valor.

“We have talked to Anvisa, received material from Moderna, and are preparing the documentation [of the new vaccine] to submit to Anvisa in the coming months,” he said. Mr. Seraphim says he is considering a scenario in which Moderna’s new vaccine will be available in Brazil by the beginning of 2023. “After the approval, the availability is fast.”

The executive said that the company has also already started talking with officials of the National Immunization Program so that Moderna’s vaccine is included in the federal program.

The vaccine Moderna plans to bring to Brazil will be aimed at those over 18 years old. Studies about the bivalent vaccine for children are still being carried out.

Moderna’s vaccines will come ready to use. Moderna has seven plants and more than 1 billion people have already been inoculated with the company’s traditional Covid vaccine in 70 countries. A vaccine that includes subvariants is on the plans for both companies.

Pfizer in Brazil said that it is considering submitting test data for its bivalent vaccine to Anvisa in the coming days. “We expect to file with Anvisa this month the adapted bivalent ComiRNAty vaccine BA.1 for regulatory evaluation,” the company said in a statement.

As for the arrival in Brazil of Pfizer’s bivalent vaccine, the company says this “estimate will depend on regulatory analyses, as well as definition with the Ministry of Health.” It added that “Pfizer’s vaccine supply contract in Brazil includes delivery of potential adapted vaccines and or for different age groups.”

Zodiac’s chief medical officer, the immunologist Glaucia Vespa, recalled what seems to be the dominant perception among health experts: despite a reprieve from the pandemic, the coronavirus will continue to circulate. “We are in a transition phase. We have the pandemic period, and we may have the seasonal period [of Covid-19]. Now we are living through that transition period,” she said. “And even though there may be discussions [about the evolution of the pandemic], Sars-Cov-2 is clearly here to stay.”

In Brazil, according to the Ministry of Health, 178.7 million people took the first dose and 159.9 million took the second one. The booster dose was administered to 104.7 million. The second booster dose, however, has reached a much smaller audience so far: 19 million. And the additional dose, only 4.8 million.

Brazil will continue vaccinating its population throughout 2023 – as will most countries. And manufacturers of the new bivalent vaccines see themselves in a more competitive condition to meet this demand next year.

Thiago Barbosa, head of vaccines at Zodiac, says that one vision for 2023 is that there will be a global positioning for a boost of bivalent vaccines. “I see a big challenge next year regarding vaccine availability for the whole globe, thinking of two companies that would be with ready-made vaccines that include the omicron issue,” he said. He added that the company has been working to meet this future demand from Brazil and the region.

“Brazil is the second-largest market in the world for vaccines, including Covid vaccines, by revenue. Brazil occupied the fourth position in the global scenario before the pandemic in the public and private-sector market and, with the pandemic, the country went up to the second position,” he said. “It is an extremely strategic country for any organization that wants to develop a vaccination platform.”

*By Marcos de Moura e Souza — São Paulo

Source: Valor International

https://valorinternational.globo.com/
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Companies renegotiate payment conditions

Debenture issuers seek creditors to review contracts

08/17/2022

The number of companies that have had to sit down with creditors has grown amid a worsening economic scenario and rising interest rates and inflation. This was made clear by the increase in the number of meetings of bondholders held in recent months. In most cases, the meetings between issuers and creditors were used to renegotiate the payment schedule and guarantees. Yet, there are also examples of non-compliance with the so-called covenants, or the restrictive clauses in contracts.

Considering only public companies, the number of calls for bondholders’ meetings has more than tripled. From January to July, 71 were called, while in the same period last year there were 22, according to a survey carried out by Valor based on documents sent to the Securities and Exchange Commission of Brazil (CVM). The scenario is the same in the field of private companies, trustees told Valor. These entities, whose activity is regulated by CVM, act as intermediaries in the relationship between bondholders and issuers.

“In 2020, we had that shock in the economy with the pandemic. Now we see the consequences very clearly, with companies in need of restructuring their debts, asking creditors to adjust to the new reality,” said Karolina Vangelotti, a partner and director at Pentágono. From January to July, Pentágono attended 656 such meetings. The number corresponds to almost 80% of those held in 2020. Last year, there were 1,097 in total.

Vórtx, another trustee, saw the number of meetings related to corporate debt increase 40% in the first half of the year, to nearly 100.

Eugenia Souza — Foto: Silvia Zamboni/Valor

Eugenia Souza — Foto: Silvia Zamboni/Valor

One of the most common requests made by borrowers was the approval for changes in payment flow or rates, said Eugenia Souza, a partner and head of corporate trust at Vórtx. “We saw indexers skyrocket, which made debts more expensive. When looking at the cash flow, companies decided to negotiate, for example, to make semi-annual payments instead of monthly disbursements,” she said.

CVC and Metalfrio Solutions are examples of companies that managed to change the amortization and remuneration payment dates for bondholders in the first half of the year.

Requests for substitution of guarantees have become more frequent in the meetings. It is common, for example, that in the case of subsidiary issues, the debt is guaranteed by a suretyship from the parent company. With an eventual decrease in the holding company’s capacity to cover the debts of all its subsidiaries due to a decrease in dividends received, it has become necessary to exchange the guarantee for other security interests.

The fear of a decrease in the capacity to generate profit has also led companies to move before an eventual non-compliance with financial indicators. “They understand that they won’t have an EBITDA as previously projected and prefer to ask for a covenant exchange,” Ms. Ms. Souza said. “When the issuer has good faith, he prefers to negotiate rather than wait and see an acceleration of maturity.”

Of the meetings related to corporate debt with Vórtx’s participation in the first half of the year, almost 20% were for declaration of acceleration of maturity – of companies that failed to comply with the agreed terms and therefore had to pay what they owed earlier than planned.

Since companies don’t usually make a single issue and know that they will eventually tap the debt market again, having an acceleration of maturity can affect their reputation as good payers. “The company wants to come back to the market looking good, so there are people who get ahead of the curve and do the restructuring before they can’t deliver,” said Antonio Amaro, head of fiduciary services at Oliveira Trust.

ISA Cteep, for example, asked bondholders in March for a remission, considering the possibility that it would not be able to meet the agreed debt-to-equity ratio at the time of debt issuance. As justification, the energy company said it was studying potential asset acquisitions and that revenues had been affected by the Covid-19 pandemic. These factors could impact the financial statements and make it unfeasible or impossible to meet the target, the company said in documents.

From the investor’s standpoint, the economic uncertainty scenario imposed a more careful look on the compliance with what was agreed with the company at the time of issuance. “When everything is calm, investors are calm. When the payment is in the account every month, they usually forgive if the company delays a report, for example. In a crisis scenario, all monitoring becomes more rigorous. They want deadlines punctually met and begins to call more meetings,” Ms. Souza said.

According to the Brazilian Corporation Law, the meetings can be called either on the initiative of the issuers, the trustees, the CVM, or investors, if they represent at least 10% of the outstanding debt. The trustee has the obligation to attend the meeting and provide bondholders with the information they are requested to provide, according to the law.

*By Rita Azevedo — São Paulo

Source: Valor International

https://valorinternational.globo.com/
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IBM sees Brazil as worth investing in

Global corporate spending on cloud services reached $55bn in the second quarter, according to data from Synergy Research Group

08/17/2022

Howard Boville — Foto: Divulgação/IBM

Howard Boville — Foto: Divulgação/IBM

IBM, one of the largest technology companies in the world, is trying to increase its share of the cloud computing market and has Brazil, especially banks, as a niche worth investing in.

Lenders are long-time clients of the company both for the acquisition of mainframe computers, which are the large ones capable of processing a massive volume of information, and cloud computing, a model in which clients pay for using technology resources via the Internet.

For the banking segment, IBM advocates the adoption of a hybrid cloud by companies, which comprises the private cloud, service and on-demand processing allocated within the company’s technology infrastructure, and the public cloud, based on the structure of cloud service providers.

Banks of all sizes are migrating part or all of their technology infrastructure to cloud computing. Itaú Unibanco, for example, should migrate 45% to 50% of its infrastructure to the cloud by the end of the year – currently, 30% of its applications are in the cloud provided by AWS, sources say. AWS, the leader in the global cloud market, is controlled by Amazon.

The offer of hybrid cloud services is IBM’s strategy to gain ground against competitors. In the second quarter, the company known as Big Blue was in the fifth position in the ranking of cloud services and infrastructure in all segments, with a 4% share. AWS leads the pack with 34% of the market, followed by Microsoft (21%), Google (10%), and Alibaba (5%).

Global corporate spending on cloud services reached $55 billion in the second quarter, according to data from Synergy Research Group. “Despite turbulence in currency markets and a much strengthened U.S. dollar, that still represents 29% growth from last year,” the consultancy said.

Banks are also accelerating their cloud investments against a difficult macroeconomic backdrop compounded by the risk of recession in the United States, said Howard Boville, senior vice president and head of IBM Cloud Platform. “All global institutions will do whatever it takes to preserve their margins. And that will include looking more closely at the projects that are bringing value to them,” the executive, also a former chief technology officer at Bank of America, told Valor.

Mr. Boville, who came to Brazil to participate in a panel at the Febraban Tech event last week, sees the migration of applications from Brazilian banks to cloud computing services as more advanced compared to other countries. “A lot of the work being done with Brazilian regulators is paving the way around data privacy and cybersecurity,” he said.

Marcelo Braga, IBM’s CEO for Brazil, agrees with the accelerated migration to the cloud among Brazilian banks and notes that this is not happening across the infrastructure. Mobile banking and internet banking are the first segments banks are moving to the cloud, he said.

Among structural systems, mainframes, which IBM provides, are still dominant among large banks, Mr. Braga said. “This connection [between mainframe and cloud] is what makes products faster in terms of innovation and opens up new opportunities,” he said.

Mr. Boville, who also created a technology best practices council, currently with 120 participating banks worldwide, notes that the advance of “open banking” here and in other markets still worries the industry about the security of smaller lenders.

“If you’re sharing consumer data, it allows you to have open banking and therefore more competition in the market,” he said. “That could mean that small companies that want to enter the market could put consumer data or technology operations at risk to the standard expected of a large lender,” he said.

According to Mr. Boville, who specializes in offering cloud computing tied to regulatory issues, especially in the financial industry, IBM’s proposal is to eliminate this risk with a turnkey cloud offering. “Whether you’re a big bank or a fintech, you inherit the cybersecurity controls, technology operations controls, and all the laws, rules, and regulations that you need to comply with and that the biggest banks operate,” Mr. Boville said.

In the second quarter, IBM reported a net profit of $1.5 billion, up 81% year-over-year, while revenues were up 9% to $15.5 billion. The hybrid cloud services represented 38.1% of total revenue, equivalent to R$5.9 billion in the quarter, up 24% year-over-year. The infrastructure division, which includes mainframes, invoiced $4.2 billion in the period, up 19% year-over-year. Revenue with mainframes increased 69% in the period, according to the company.

*By Daniela Braun — São Paulo

Source: Valor International

https://valorinternational.globo.com/
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As 5G coverage spreads, cellphone prices plummet

According to GfK, customers are paying more than 30% less for a device than in January

08/17/2022

5G networks were activated on Tuesday in Curitiba, Goiânia, and Salvador — Foto: Pixabay License

5G networks were activated on Tuesday in Curitiba, Goiânia, and Salvador — Foto: Pixabay License

The progress of the 5G coverage in Brazil — followed by the expansion of the supply of mid-range smartphones compatible with the technology — has driven retail sales, especially in recent weeks.

Between the first week of January and the beginning of this month, the average price of 5G cellphones fell 30.9%, according to data from market research company GfK. In the same period, the share of 5G models in total smartphone sales increased to 17.5% from 6.7% in volume. As these are products with a higher unit price, their share participation in the market’s sales in the first week of August was higher, at 33%.

The 5G networks were activated on Tuesday in Curitiba, Goiânia, and Salvador. Since July 6, when high-speed mobile internet debuted in Brasília, it has so far been present in certain neighborhoods of eight Brazilian capitals.

“We have noticed a 40% higher demand for 5G devices in cities that already have the signal, compared to the beginning of the year,” said Fabio Gabaldo, chief commercial and technology officer at Magazine Luiza.

The expansion of the mix of mid-range 5G models, in addition to the more expensive ones, contributed to a slight drop in the average price of the devices sold by the retailer, to R$2,800 from R$3,000 between July last year and the same month this year, Mr. Gabaldo said.

Fernando Baialuna, GfK’s chief retail officer, said the arrival of 5G networks is a stimulus for consumers to change 4G devices for more expensive mid-range models, in a mature smartphone market such as the Brazilian one — but it is a move “that still has a long way to go.”

In June, Brazil reported 259 million active mobile devices, being 207.7 million (80.2%) from individuals.

At retailer Fast Shop, the sales of 5G smartphones doubled in the second quarter compared with the same period last year and intensified with the arrival of 5G technology in São Paulo on the 4th of this month, while Mercado Libre reported having sold 10 times more 5G smartphones between January and July this year than in the whole of last year.

After the special offer of 5G devices for Father’s Day (second Sunday of August), Fast Shop informed that it would run two seasonal campaigns this month, including smartphones with 5G technology. In one campaign, which went live on Monday and runs until the 24th, the retailer highlighted the lines most wanted by consumers, giving discounts of 33.5% on Apple’s 128-gigabyte iPhone 12, and of 34.7% on Samsung’s Galaxy M23 5G for cash purchases with Brazil’s instant-payment system Pix. The next campaign will take place between August 25 and 31.

The greater interest for televisions in the fourth quarter of the year, because of FIFA World Cup, in November, can be another stimulus for smartphone sales promotions, said Mr. Baialuna, with Gfk.

“This year, the phenomenon of the second screen to watch the World Cup gains more strength since there are options of smartphones with better screen resolution and higher speed access to mobile networks,” said Mr. Baialuna. According to him, retailers begin to bring forward the supply of TV sets to September because of the World Cup and smartphones with discount are expected to follow this movement.

*By Daniela Braun — São Paulo

Source: Valor International

https://valorinternational.globo.com/
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Brazilian imports of fertilizers grew by 14.7% in 2022

The main exporter was Russia, accounting for 24% of the total

08/16/2022

Fertilizer handling at Paranagua port — Foto: Divulgação

Fertilizer handling at Paranagua port — Foto: Divulgação

Brazilian fertilizer imports grew 14.7% in the first seven months of the year and reached 21.8 million tonnes, a report by the consultancy Agro, of bank Itaú BBA, highlighted on Monday. Despite the war in Eastern Europe, Russia was the main source of purchases, with a 24% share in the total volume.

The product from Russia continues to arrive in the country “normally,” and in July alone the country sent 828,000 tonnes to Brazil, 10% more than in the same month in 2021. The purchases originated in Belarus, an important global exporter of potash, totaled 26,000 tonnes last month, 90% less than a year earlier (306,000 tonnes).

“As industries have been accelerating fertilizer imports since the beginning of the Russia-Ukraine war, fertilizers have been arriving in Brazil in volume even above 2021, which mitigates concerns about product availability,” the bank’s analysts say.

With the recent drop in fertilizer prices, they note, Brazilian farmers may have postponed the purchases of the input, contributing to the increase in the volume stored in ports. Agro informed that there are reports of high stocks, which may concentrate the delivery period and reduce the monthly import volume until the end of the year.

Earlier this month, Anda, an industry association, said that fertilizer deliveries between January and May increased only 1.7% compared to the first five months of 2021, to 14.6 million tonnes. In May, 3.2 million tonnes were delivered, a decrease of almost 5% compared to the same month last year.

*By Erica Polo — São Paulo

Source: Valor International

https://valorinternational.globo.com/
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