LatinFinance - July/August 2017 - 44

Suzano Papel e Celulose had stayed
away from the capital markets for years.
Following a massive round of investments,
the Brazilian pulp and paper producer's
leverage ratio peaked at 6.7 times Ebitda
in 2013. It soon focused on a strategy of
increasing cash flows and reducing debt,
bringing its leverage down to 2.3 times
Ebitda by the end of last year.
Suzano's leverage ratio increased to 2.8
times Ebitda at the close of the first quarter but the company kept a comfortable
amortization schedule and stayed on the
path to reducing net debt to below 2 times
Ebitda by 2018.
With cash flows on the way up and
investments on the way down, Suzano
returned to the cross-border bond market
in July last year with the first dollar-denominated green bond from Latin America,
raising $500 million at a rate of 5.75%.
That 10-year issue set the stage for Suzano's longest cross-border issue to date,
a 30-year green bond for $300 million that
was priced at 7% in March 2017.
"Not just any company does a 30-year
issue, especially a non-investment grade
company," Marcelo Bacci, chief financial
officer at the Ba1/BB+/BB+ rated borrower
tells LatinFinance. "But the market sees us
as an investment grade company, and we
negotiated investment grade spreads."
Suzano's ability to negotiate relatively
tight spreads as the first true high-yield
issuer from Latin America to sell 30-year
bonds in the cross-border market make
the company the winner of LatinFinance's
award for High-Yield Corporate with the
Best Bond Market Strategy.
Suzano certainly got the timing right. It
priced the 30-year note on March 9, just
weeks before investigations into possible

44 LATINFINANCE.COM - July/August 2017

Attacking leverage
Suzano's Net Debt/EBITDA (x)

6.0
5.0
4.0
3.0
2.0
1.0
0.0

Source: Suzano

1Q16
1Q17

Brazilian pulp and paper
company shrugged off
its sub-investment grade
ratings to tap the crossborder bond market for
30-year debt, its longest
issue to date

"YOU DON'T ISSUE
BONDS WHEN YOU
WANT TO. YOU HAVE
TO ISSUE BONDS
WHEN THE MARKET
LETS YOU"

1Q12
1Q13
1Q14
1Q15

Suzano

MARCELO BACCI, SUZANO

1Q09
1Q10
1Q11

HIGH-YIELD CORPORATE WITH THE
BEST BOND MARKET STRATEGY

fraud in Brazil's meatpacking industry
unearthed allegations that President
Michel Temer had endorsed paying bribes
to the former speaker of the lower house
of Congress, Eduardo Cunha.
The cross-border bond market had
worked nicely for Brazilian issuers in
the first few months of the year. Among
corporate issuers, the food processing
company Marfrig printed $750 million
in seven-year notes and the mass media
group Globo sold $200 million in 10-year
bonds in the first quarter of 2017.
The state-owned energy company
Petrobras added $4 billion to three series of bonds later in mid-May, just days
before the latest political scandal hit the
headlines. Brazil's corporate issuers have
since backed off plans to sell cross-border
notes, preferring to wait for better rates at
a later date.
"You don't issue bonds when you want
to. You have to issue bonds when the
market lets you," Bacci says. "The window
was open for us," he says of the March
bond sale.
Suzano does not have to raise fresh
funds before the end of the year, nor does
it plan to buy back existing bonds in the
market, Bacci says. Still, for an exporting
company like Suzano, the cross-border
bond market is always open for business,
even if conditions are tougher than they
were just months ago, he says.
Suzano is already the second largest
producer of eucalyptus pulp in the world
and the fourth largest pulp maker, but
with no immediate need to return to the
bond market and with a manageable debt
payment schedule through the end of
next year, it is free to pursue acquisitions
in the industry.
Local beef company JBS, a suspected
accomplice in the corruption investigations, is in talks with the Chilean conglomerate Empresas Copec to sell the pulp and
paper subsidiary Eldorado, but Suzano is
also looking at the asset.
"Consolidation in the pulp industry is
one of our strategies," Bacci says. "It interests us in theory, and we're studying it."
According to the latest earnings report,
Suzano had $3.16 billion in dollar-denominated debt and 11.2 billion reais ($3.4
billion) in local-currency debt at the end
of the first quarter this year. The company
also had 4.07 billion reais in cash, with
debt maturities of 1.4 billion reais through
the end of 2017 and 2.3 billion reais in
2018. LF
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