Author: Antonio Guerrero



By Antonio Guerrero



Mantega: Welcomes
foreign investors to Brazil

Taking advantage of falling yields, Brazilian borrowers are returning to international debt markets. BNDES, the state-owned development bank, sold $1 billion in 10-year bonds in June, yielding 6.546%. The deal, managed by HSBC and Goldman Sachs, allows the bank to increase its loan portfolio. BNDES last came to market with $1 billion in 10-year notes in May 2008, with a 6.4% coupon, ending a seven-year market hiatus. BNDES's international bonds are rated BBB- by S&P; and Baa3 by Moody's.


Lesser-quality issuers also returned to the market. Banco Cruzeiro do Sul, focused on payroll-deductible consumer loans, sold $60 million in two-year dollar-denominated notes in June. The notes offer a 9% coupon and were priced to yield 9.75%. The bank expects to grow its loan portfolio by 70% year-on-year in 2009 and has a non-performing loan ratio of 0.79%, compared with the financial system's 5.2%. It last sold $110 million of two-year notes in April 2008, yielding 7.37%.


Brazil's CBD is acquiring a controlling stake in Ponto Frio, a major appliance chain, regaining its post as the country's largest retailer. CBD will take a 70% stake in Globex Utilidades, which owns Ponto Frio, for an estimated $420 million. The merger creates a chain of 1,200 stores nationwide. CBD had lost its top spot after French retailer Carrefour acquired a local supermarket chain in 2007.


The Brazilian government denied press reports alleging it would reinstate a 1.5% IOF financial transactions tax on bonds acquired by foreign investors. The tax was eliminated last October, and finance minister Guido Mantega says the government welcomes foreign purchases of Brazilian bonds and will not introduce measures that jeopardize capital inflows.


An 11-member senate panel launched an inquiry into Petrobras, the state-controlled oil company, as opposition parties charge it evaded more than $2 billion in taxes and engaged in procurement fraud. The investigation is slated to continue through year-end. Though CEO José Gabrielli denies any malfeasance, the probe could hurt share prices and pose challenges for financing the company's $174.4 billion investment program.