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BNDES wants to sell R$7bn of Eletrobras shares

Bank still holds around 8% of the shares and is studying a block operation instead of a public offering

15/05/2022

Rio de Janeiro – Edifício sede do BNDES, Banco Nacional de Desenvolvimento Econômico e Social, no Centro do Rio. (Fernando Frazão/Agência Brasil)

The Brazilian Development Bank (BNDES) is evaluating the sale of most of its remaining position in Eletrobras and has already begun talks with investment banks on the subject. The lock-up imposed on the capitalization last June ends on December 7th, when the institution’s shares become free for trading.

BNDES is considering selling R$7 billion, corresponding to the common shares held directly and via BNDESPar, which are the most liquid shares of Eletrobras. The preferred way is a block trade, not a public offering, sources said.

The bank has already succeeded in an operation of this size up and running quickly. At the end of 2020, it sold R$8 billion in Vale shares in a block trade.

This will require a firm guarantee from the banks, which also explains why the initial approach was made with two large foreign banks and two large Brazilian banks. It needs to have a balance to provide support and quick connections to large investors.

It is a unique window of opportunity for the current management of the Brazilian Development Bank to complete its ambitious portfolio divestment plan before the change of government. “The BNDES wants to sell, but has not yet taken the concrete step,” said a source. “So far it has only been sounding,” added another executive.

The offer will also depend on market conditions and investor appetite. Sought, BNDES did not comment.

BNDESPar has 71.96 million common shares and 18.69 million preferred shares. BNDES holds 74.55 million common shares and another 18.26 million preferential shares. The positions add up to about 8% of the electric company’s capital. If it sells all the common shares, the bank will still hold a little more than 1% in preferred shares.

In the privatization public offering, in the middle of the year, the lock-up of 180 days from the start date (June 10) was imposed on selling shareholders and on those with positions greater than 5%. The BNDES fits both restrictions.

By Maria Luíza Filgueiras, Francisco Góes — São Paulo, Rio de Janeiro

Source: Valor International

https://valorinternational.globo.com/
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Development bank raises R$1.9bn with JBS block trade

A cruzada inócua e cara de Bolsonaro contra o BNDES

The Brazilian Development Bank (BNDES) pocketed almost R$1.9 billion on Wednesday with the sale of another slice of its shares in JBS. In a block trade coordinated by BTG Pactual, the state-owned bank disposed of 50 million shares. Since December, BNDESPar, the bank’s equity arm, has raised more than R$4.5 billion with the sale of JBS shares.

The shares were traded at R$37.52, the price of the firm guarantee given by BTG. A source who followed the operation said that JBS bought shares again, which signals that the meatpacking giant still sees a large discount on its market capitalization.

In December, when BNDES started divestments in JBS with the sale of 70 million shares, the company took virtually all the shares for R$38.01 each, disbursing more than R$2.5 billion. BofA was the coordinator of the block trade.

With this Wednesday’s sale, BNDES reduces the position in JBS to less than 20%. The bank’s bet on the company was quite profitable. Since 2007, BNDESPar has invested R$8.1 billion in JBS, overperforming Brazil’s benchmark stock index Ibovespa, interbank deposit rate CDI and the goal of the development bank’s pension fund.

As the BNDES continues to reduce its position in the company over the next few months, JBS will be able to get rid of the overhang that weighs on its shares.

Analysts believe that JBS is trading at a discount considering the positive moment, especially in the United States. Last week, analysts Thiago Duarte and Henrique Brustolin, with BTG Pactual, revised the target price for the stock to R$55 from R$50, which embeds a potential for appreciation of more than 45% over current prices.

According to the analysts, JBS shares trade at a multiple of 3.7 times the projected EBITDA for 2022 and 4.6 times for 2023, which is 20% below the historical level.

JBS is currently valued at R$88 billion on the stock exchange. The BNDES’s position is worth R$17 billion.

Source: Valor International

https://valorinternational.globo.com

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Development Bank to invest up to R$2.5bn in infrastructure funds

A cruzada inócua e cara de Bolsonaro contra o BNDES

The Brazilian Development Bank (BNDES) will invest up to R$2.5 billion in infrastructure funds, which will be selected through a competitive process. The state-owned bank opens a call for proposals this Monday to choose up to five funds. A maximum of R$500 million will be allocated to each of them. The bank expects, however, to draw at least R$5 billion more from the private sector through the effort.

Asset managers interested in receiving funds will have until March 4 to submit their proposals. The choice will be made by the bank, which will evaluate the fund’s investment thesis, governance and costs, as well as the manager and the team involved. The selection is expected to be concluded by the first half of this year.

It is a new investment mechanism of the bank. “The BNDES’s central objective is to increase its instruments for operating in infrastructure. We already have direct investments, financing, and now we want to allocate resources through funds,” said Bruno Laskowsky, head of shareholding, capital market and indirect credit at BNDES.

The plan is to boost both debt funds, destined to finance projects and companies, and equity funds, which will directly invest in the capital of the businesses. Of the five chosen, up to two will be debt funds and three equity funds.

The BNDES will give priority to investments in basic sanitation and urban mobility, segments that have a greater social impact. There is also a preference for funds from institutional investors (who manage third-party money) and with criteria for measuring social and environmental impact.

Mr. Laskowsky highlights two other focuses sought by the BNDES. The first is “project finance” operations, that is, in which the project is capable of “self-financing,” providing its cash flow as a guarantee. “We want to privilege the risk-taking of the project, and not necessarily the risk of the larger guarantor.”

The second goal is to lengthen the term of the loans. “We are looking for structures that follow the long-term timing of infrastructure projects, which is more like 15, 20 years, while the term of bank loans in general is 7, 8 years,” he said.

For this, the idea is that the funds are closed-end, with a minimum term of eight years, and up to 15 years (equity funds) and 20 years (debt funds), said Filipe Borsato, head of fund investments at BNDES. “The idea is, in the short term, to serve these companies and projects benefited, but also, in the long term, to bring institutional investors to the country and give them more security to put funds into infrastructure projects in Brazil,” he said.

The idea is for the BNDES to be a “relevant minority shareholder” in these funds, and for the allocation decision – that is, which projects or companies will receive the investments – to be made by the private-sector manager, the executives highlight.

“The choice of specific projects will be made by private-sector managers, not by the BNDES. Typically, the term for the allocation of funds is three to six years, so the benefited projects will be structured and selected over the next few years. It is not something thought out for the projects of 2022,” Mr. Borsato said.

For this reason, the fact that the process takes place in an election year will not be a problem, and potential changes in the bank’s direction is not a concern, Mr. Laskowsky said.

“We are talking about 15, 20-year projects. This goes beyond any administration. And the country has a huge gap in infrastructure. The math done when it comes to thinking about investments is: there are people prepared to execute the works, there are good project structurers, there is financing and there is demand. These factors are not trivial. Stability helps a lot, of course, but the central theme here is not electoral volatility,” he said.

As for BNDESPar the move is part of its “capital recycling” process, Mr. Laskowsky said. Since 2019, the development bank’s equity arm has been disposing of its shares in companies such as meatpacker JBS, paper and pulp maker Klabin and mining giant Vale, among others. The idea, the executive said, is to rebuild the portfolio having as guidelines innovation, environmental and social impact.

The investment in infrastructure funds will be a first experience in this investment model, which may be extended to other areas of BNDES’s operations. “This is the first call. We will understand how the process will work out. But one possibility is to give guidance, which could be annual, biannual, or triennial, and the bank will make subsequent calls in different strategic sectors, not just infrastructure,” he said.

Source: Valor international

https://valorinternational.globo.com/

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