In first two months, firms raise $10.4 billion, poised to outpace 2024 levels
02/28/2025
In a rush to tap into the U.S. debt market, Brazilian companies raised $10.4 billion in the first two months of 2025, already half of the total amount raised throughout last year. This figure includes nine corporate offerings and one issuance by the National Treasury.
The volume for January and February also surpasses that of the first quarter of 2024, which totaled $10 billion. Market projections indicate that the year’s total could reach $30 billion.
According to market sources consulted by Valor, activity is expected to remain robust in March, after Carnival, with one transaction already scheduled for next week. XP is anticipated to be among the next companies to issue bonds, as it disclosed in an analyst call this month.
In addition to attractive rates for issuers, the surge in activity also reflects the normalization of markets following Donald Trump’s inauguration and increased selectivity among local investors. This comes after a record period of fixed-income issuances and tighter rates domestically. “The market is now more balanced between local and international opportunities,” said Gustavo Siqueira, head of fixed-income capital markets at Morgan Stanley in Brazil.
For Samy Podlubny from UBS BB, the “hiccup” in the local debenture market in December wasn’t as severe as the crisis following the scandal involving retailer Americanas but reminded companies that the domestic market can face setbacks. “More companies are now considering international markets to meet their funding needs for the year,” he said.
In the international secondary market, spreads on Brazilian assets have returned to levels seen before December, when worsening economic expectations affected debt prices, said Caio de Luca Simões, head of debt capital markets at Bank of America (BofA) in Brazil. “Issuers are once again optimistic about international markets and have encountered strong investor demand,” he noted.
Strong demand
January saw less activity than usual. Historically, Brazilian issuers represent about one-third of Latin American debt offerings, but in January, their share fell to 13%. In February, however, this participation rose to 35% for dollar-denominated transactions, according to Miguel Díaz, head of debt capital markets at Santander Brasil. “It was an intense month, with leading issuers reacting swiftly to stabilized market conditions,” he said.
The initial uncertainty was partly due to market caution surrounding Mr. Trump’s inauguration and potential tariff changes. However, the measures turned out to be milder than expected, explained Felipe Thut, head of fixed income at Bradesco BBI. “Additionally, there is strong liquidity in the U.S. market, which has reduced spreads for U.S. corporate bonds and prompted investors to look at other markets, including Brazil,” Mr. Thut said.
Brazilian issuers are currently securing tighter spreads over U.S. Treasuries compared to 2024 levels. Mr. Thut anticipates more issuances this season, expected to conclude between April and May. “This market moves in waves, and more issuers are looking at it now. As fourth-quarter financial results are released, others may also be encouraged,” Mr. Díaz from Santander noted.
Issuances in February
February saw six major issuances. Embraer raised $650 million with a 5.98% interest rate and a ten-year maturity, attracting $7 billion in demand. The National Treasury followed, issuing $2.5 billion in ten-year bonds, initially planned at $2 billion but increased due to high demand, with order books closing at $5.4 billion, according to people familiar with the transaction.
On the same day, Raízen and Itaú Unibanco launched offerings without diminishing investor interest. Raízen issued $1.75 billion through two transactions: reopening a 30-year bond and issuing a 12-year bond.
After several years without accessing the U.S. dollar debt market, Itaú Unibanco raised $1 billion with a five-year maturity — a relatively large amount for a financial institution. Investor demand reached $2.9 billion, allowing banks to reduce the bond’s rate.
Frequent international issuer Vale raised $750 million by reopening its longest bond, a 30-year note, attracting $2.6 billion in demand. Bradesco, which issued $750 million in January, reopened the issuance in February for an additional $250 million.
For Mr. Siqueira from Morgan Stanley, global investors who allocate funds across different regions helped drive demand for these issuances.
Pedro Frade, head of international debt capital markets at Itaú BBA, noted that the surge in activity was also due to a reduced perception of Brazilian risk and market adjustments after Mr. Trump’s inauguration, which lowered rates and opened opportunities for issuers. “There was also a positive sentiment that the market was in buying mode. All the issuances this year were successful,” he said.
Outlook for 2025
Banks estimate that total issuance volume for the year could return to levels of $25 billion to $30 billion. “This would mark a return to historical fundraising levels,” Mr. Podlubny of UBS BB said. In 2024, total issuances reached approximately $21 billion, according to Bond Radar data.
Despite the surge in international debt issuances by large Brazilian companies, the local fixed-income market is unlikely to be significantly impacted. Although more companies are accessing international funding, it remains mostly limited to those with dollar-denominated revenues. The local market, which has deepened in recent years, is expected to remain accessible to major companies. For example, Vale returned to the local debenture market last year after a nine-year hiatus, despite favorable international conditions.
*By Rita Azevedo e Fernanda Guimarães — São Paulo
Source: Valor International