Brazil: Cielo and Petrobras give grounds for optimism
‘Deal surge’ predicted; Goldman Sachs urges caution.
By Rob Dwyer
Cielo’s landmark R$4.6 billion ($1.5 billion) local bond has lifted hopes that the volatility that has severely restricted local debt activity – and halted international debt capital markets issuance completely from Brazilian borrowers – is receding. Cielo, a credit and debit cards company, is one of the leading Brazilian blue chips and the deal was the second largest ever sold in Brazil’s domestic markets. Demand was more than R$12.2 billion, equivalent to one-third of the total volume distributed in 2014.
The deal represented a reopening of the CVM400 market (unfettered marketing and distribution structure) with restricted-distribution deals previously dominating year-to-date. Asset managers took most of the paper (91.1%) with the remainder being distributed to insurance companies (8%), banks (0.9%) and private banking clients (0.8%).
The lead coordinator Bradesco BBI, along with joint leads BTG Pactual and JPMorgan, claim to have repriced the Brazilian credit market and provided a benchmark for other issuers to come. The large book enabled the banks to tighten pricing, from initial guidance of around 109% of CDI to close at 105.8% of CDI – a level that is below capital markets funding costs for leading Brazilian banks.