LatinFinance - January/February 2013 - 52

together the day before Christmas so as
to be able to fund the first week of 2012.
The global coordinators pre-funded the
transaction in early January ahead of the
bank meetings.
It went out to syndication in a difficult
environment for banks, in one of the
first deals since the European debt crisis
exploded.
“European banks were in a delicate
state at the end of the year,” Jean-Philippe
Adam, head of loan syndications at
Crédit Agricole, global coordinator on
the transaction with Citi, HSBC and
JPMorgan.
“It was a very important acquisition
for the region and for the client,” says
Rodrigo Gracia, executive director at
JPMorgan. That the acquisition was done
with cash made the story even more
compelling because it was unsecured
and sold without guarantees. That the
contribution of the borrower’s own capital
toward the Usiminas purchase was 68%,
well above the 20%-30% standards, made
the deal easier to accept.
The facility pays Libor plus 337.5
basis points. Santander and Mizuho were
joint bookrunners, with Intesa Sanpaolo,
Inbursa and Natixis as mandated lead
arrangers. Bank of Tokyo-Mitsubishi,
CorpBanca, and UniCredit were arrangers.
Inbursa, Bank of Tokyo and Corpbanca
were new lenders to the borrower. The
deal was oversubscribed by 50%.
Ternium’s buy-in to Usiminas’
controlling group helped thwart a
takeover by Brazilian steel producer
CSN. Ternium acquired 84.7 million
common shares, its Siderar unit 30 million
and fellow Techint Group company
TenarisConfab 25 million. In the future,
the steelmaker will focus on expansion in
a high-growth market.
“It was the most compelling and best
story for 2012,” Gracia says. “They have a
good story in the region and the leverage
out of that to continue with their strategy
and to continue bringing banks into their
transactions.” LF

>

UPDATE
For daily news of local market transactions,
see www.latinfinance.com

52 LatinFinance

DOTY stories-Final.indd 52

____________________________________

Financing
Innovation
Banco do Brasil $1bn Hybrid
Tier I Perp
____________________________________

J

ust how Basel III will affect banks’
capital requirements in Brazil is still
far from clear. So when Banco do Brasil
introduced a new type of hybrid security
in January 2012 that would be Basel III
compliant — irrespective of what that
might ultimately mean — it was thinking
well ahead of its competitors.
The $1 billion hybrid tier 1 perpetual

financial institutions as going concerns.
Previous tier 1 perpetuals would aid
borrowers during liquidation events, but
were not useful for healthy banks that
were going concerns (as they couldn’t
write off principal as long as they are a
going concern).
The structure allows Banco do Brasil
to qualify the issue as tier 1 capital under
current and future regulations.
In a key innovation, the
documentation includes a ‘qualifying
amendment’ or ‘floating indenture’ that
allows the borrower to amend conditions
unilaterally once new Basel III regulations
are implemented in Brazil.
“These types of provisions set a new
standard relative to the other post-Basel
III deals,” says Chris Gilfond, co-head of

Monteiro: forward thinking
NC11 bond was the third ever Basel
III-compliant bond – as well as a first in
emerging markets – and has set a template
for other financial institutions as they
prepare to adapt to a new regulatory
environment.
“This is a landmark transaction that
has changed the landscape of investments
available,” says Marcelo Delmar, head of
LatAm DCM at BNP Paribas, a bookrunner
on the deal with Banco do Brasil, Citi,
HSBC and Standard Chartered.
The structure was a result of the
financial crisis, and is meant to help

LatAm debt at Citi. He says it is the first
transaction with principal writedown
provisions. If the bank needs capital these
debt investors get written down, without a
provision to get written back up. The bond
was perceived as junior to the equity, with
lenders taking losses before the equity is
even diluted.
The BB rated bond generated a book of
$6.2 billion before pricing at par to yield
9.25%, higher than the bank usually pays
but below its normal 13%-14% cost of
capital.
The unsecured and subordinated

January/February 2013

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LatinFinance - January/February 2013

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