International market is heated; meatpacker JBS raised $2.5bn Tuesday
09/06/2023
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Caio de Luca — Foto: Anna Carolina Negri/Valor
Holidays in the Northern Hemisphere are over, and Brazilian companies that still haven’t raised funds this year are lining up to access the foreign debt market in September. According to people who talked to Valor, up to six companies should launch debt operations this month, with an estimated volume that could add up to $7 billion.
The market has been hot on this first week after the summer break. Meatpacking company JBS, for example, raised $2.5 billion Tuesday, surpassing the initial estimate of $1 billion due to high demand, helping increase forecasts for the month. It was the largest issuance by a Brazilian company since at least 2017, when Anbima’s historical series started. Orders reached nearly $8 billion, sources say.
On Monday, when U.S. markets were closed due to Labor Day, meatpacker Minerva announced to investors its intention to raise up to $1 billion in an operation to be priced until Thursday. The market expects a rate between 8.5% and 9%. The funds might cover the purchase of assets from competitor Marfrig. The company’s last issue was in 2021, with a 4.375% rate.
Other entities contemplating tapping the debt market this month include CSN and the Brazilian Treasury, which is preparing to offer green bonds for the first time. According to people familiar with the operations, another issuance should be announced by early next week.
Before JBS and Minerva, eight Brazilian companies had already launched bonds in the U.S. in the first half year. Frequent issuers such as Petrobras, Vale, Cosan, Embraer, and Braskem raised a combined $6.6 billion, excluding the issuance by Gol’s holding company. Thus, if the September volume is confirmed, it could top total emissions for the entire first half.
“The moment is positive for operations, considering the reduction in Treasuries’ volatility and the fact that the spreads of Brazilian companies have fallen, approaching the lowest level in the year,” said Caio de Luca, head of debt capital markets at BofA in Brazil. “Companies that need a high volume of funds to finance large projects or for acquisitions now find the moment is open abroad.”
With lower borrowing costs, companies should tap the market by seizing the opportunity to raise higher volumes with longer maturities. JBS, for example, issued two series with 10- and 30-year maturities.
In the first half, many companies paused their issuance plans as they considered rates to be too high, especially compared to their previous operations in a global context of very low interest rates. Now, some of them have decided to resume conversations with potential investors, doing so-called “non-deal road shows,” when there is no commitment to complete transactions.
If expectations for the month materialize, the volume of debt issuance will approach last year’s, which was seen as low, as many companies had anticipated their funding in 2021.
One factor that may influence the volume of funding in 2023 is the improvement in the domestic market after a troubled start to the year. According to Samy Podlubny, head of debt capital markets and structured debt at UBS BB, some companies could opt for raising funds domestically. “The September window abroad, although busy, might be a little less intense than expected because of the local market, which has presented good conditions most of the time.”
Leonardo Ono, Legacy’s corporate debt manager, notes that external funding is no longer at a prohibitive level for companies with hedging structures. However, he sees it as more attractive for companies with access to tax-exempt instruments such as infrastructure debentures. Mr. Ono said he has been eyeing local opportunities more than external issuances. “Given the uncertain scenario, it is not so attractive when the local investor converts the yield into reais,” he said.
As a sign that the local market for tax-exempt bonds is currently attractive for companies, one source claimed that some companies are discussing the possibility of raising money with these bonds and using the proceeds to buy back dollar-denominated debt.
*Por Fernanda Guimarães, Rita Azevedo — São Paulo
Source: Valor International