Revving up: BV stake boosts Banco do Brasil’s auto loan portfolio
The Brazilian government returned to international capital markets in January with $1.025 billion in dollar-denominated global bonds maturing in 2019. The 10-year issue, led by Goldman Sachs and Merrill Lynch, drew a lackluster response from investors, who found more appealing yields from competing emerging market deals. Brazil offered yields below investor expectations, with initial price talk at 3.5 percentage points above US treasuries. The spread was widened to 3.7 percentage points above US treasuries, to yield 6.13%. The issue price slipped from 98.14 to 96.5 during the first trading day. Proceeds will be used to prop up international reserves amid expectations of reduced export revenues.
The Brazilian Foreign Trade Association (AEB) predicts the value of the country’s exports will shrink by 17.7% this year, to $163 billion. This would mark the first decline in export levels since 2000. AEB says commodity exports will be hit hardest by the global economic downturn, declining by an expected 21.7%, with manufacturing exports dropping by 12.9%. The nation’s trade surplus, according to AEB’s outlook, will fall by 30% year-on-year to $17 billion this year, following a 38.2% drop to $24.7 billion from 2007 to 2008. Decreased export demand and credit availability prompted a 6.2% year-on-year drop in industrial output last November, the largest decline in seven years.
Brazilian fixed-income and equity issuance shrank by 30.7% year-on-year in 2008 and the number of IPOs fell to four last year, compared with a record 64 in 2007.
The banking sector’s consolidation continues, with state-controlled Banco do Brasil’s acquisition of a 50% stake in Banco Votorantim for $1.84 billion. According to Banco do Brasil, Latin America’s largest bank by assets, the deal quadruples its automobile loan portfolio. BV Financeira, Votorantim’s financing unit, has a presence in 18,000 car dealerships nationwide.