Latin Finance - September/October 2009 - 29

brazil liability management Leading the Way by Ben Miller fter months of boiler-plate 10-year bonds and Peru’s 15-year sovereign reopening, Brazil reopened the long end for Latin debt issuers in late July with a textbook tap of its 7.125% of 2037 bond. The sovereign capitalized on ample liquidity and increasingly bullish sentiment about a region that many investors are playing via Brazil. It paves the way for others to access duration in September, provided markets hold up. “In June market conditions got much better and we thought it the ideal moment,” Paulo Valle, Brazil’s deputy treasury secretary and director of public credit, tells LatinFinance. “The 30-year is one of our most liquid benchmarks. It is now at $3 billion, which we consider a good size with a strong secondary market. At the same time we continue with our buyback program, where daily we buy back paper.” Brazil had bought back 1.06 billion reais worth of external debt through June via these auctions, according to finance ministry data. Brazil’s 2037 tap, the longest dated cross-border LatAm issue since May 2008, raised $500 million at 108.630 to yield 6.450%, or 195 basis points over treasuries on almost $7 billion in orders. Guidance was 6.60% area, versus 110.8 to yield 6.30% at the previous close, and the issue was up at 109.7 in the aftermarket. It traded around 111 mid-August. Valle says Brazil was expecting to pay 15-20 basis points extra for the funds, but ended up conceding just 12 points, spotting the closing yield at 6.33%. Bankers on the deal add that curve inversion helped it price through the 2019. “We were in a position where we saw a good market, which had improved in the preceding two or three weeks,” Valle says. “We saw a new issue premium that we saw as acceptable and that made sense for A Showing high grade restraint, Brazil seized LatAm liquidity with a trailblazing long-dated reopening. It is opportunistic and wants to strengthen dollar and real benchmarks. us. Fundamentally, we are in a very strong position, and we aren’t going to issue into just any window that opens up.” Deutsche Bank and JPMorgan led the trade, which went mainly to fund managers in the US. for $750 million in May. Valle says Brazil’s objective in the last few years has simply been liability management, strengthening the most liquid benchmarks and repurchasing the least liquid issues. Valle stresses that Brazil is not in need of coming to the market, but will continue to be opportunistic going forward. This includes long and short dollar issuance, as well as global reais. In 2007, Brazil sold a total 3.79 billion reais in 10.25% 2028 realdenominated bonds on four different occasions. This followed 3 billion reais placed in 2022s in the second half of 2006, and a 1.5 billion real 2016 done in 2005. “Our strategy is to have well-priced curve in both reais and dollars,” Valle says. With the three bonds each at more than 1 billion reais, he explains, the government is comfortable with the Dollar and real curve efficiency: Valle amount outstanding. Brazil must also seek to balance global and domestic real bonds, therefore issuance going forward Besides encouraging opportunistic will depend on demand. sovereigns like Colombia, Peru and “What we are seeing now is that Panama, the sovereign’s success should international investors prefer the also help Brazilian corporates achieve domestic market,” Valle says, indicating tenor. The market this year has been that there might be less interest in characterized by healthy issuance from credits including Petrobras, Eletrobras and global reais. This however could change BNDES, but thus far only out to 10 years. with market conditions. “[A global real issue] is not “There is appetite for duration, but only something we are foreseeing, but if the right names,” says a New York-based demand and interest were there, we LatAm DCM banker on the Brazil tap. would have the ability to do it,” Valle Brazil sold $1 billion in new 2019 bonds in January, and reopened the issue says. LF Real Plan? September/October 2009 LatinFinance 29

Latin Finance - September/October 2009

Table of Contents for the Digital Edition of Latin Finance - September/October 2009

Latin Finance - September/October 2009
Contents
Investment Banking Survey
Who Said That?
OTPP Investment Strategy
Central Bank Scorecards
Brazil Liability Management
Real Estate Equity Resurrected
Structured Finance Forecasts
Grim Outlook. Reform Required
Banorte Seeks to Grow
Peru Spending Hits a Block
BCP Sees Better Days
Caribbean Investment Report
Sustainable Banking
Legal Services Survey
Parting Shot
Latin Finance - September/October 2009 - Latin Finance - September/October 2009
Latin Finance - September/October 2009 - Cover2
Latin Finance - September/October 2009 - Contents
Latin Finance - September/October 2009 - 2
Latin Finance - September/October 2009 - 3
Latin Finance - September/October 2009 - 4
Latin Finance - September/October 2009 - 5
Latin Finance - September/October 2009 - 6
Latin Finance - September/October 2009 - 7
Latin Finance - September/October 2009 - 8
Latin Finance - September/October 2009 - 9
Latin Finance - September/October 2009 - 10
Latin Finance - September/October 2009 - 11
Latin Finance - September/October 2009 - 12
Latin Finance - September/October 2009 - 13
Latin Finance - September/October 2009 - Investment Banking Survey
Latin Finance - September/October 2009 - Who Said That?
Latin Finance - September/October 2009 - 16
Latin Finance - September/October 2009 - 17
Latin Finance - September/October 2009 - 18
Latin Finance - September/October 2009 - 19
Latin Finance - September/October 2009 - 20
Latin Finance - September/October 2009 - 21
Latin Finance - September/October 2009 - 22
Latin Finance - September/October 2009 - OTPP Investment Strategy
Latin Finance - September/October 2009 - 24
Latin Finance - September/October 2009 - 25
Latin Finance - September/October 2009 - Central Bank Scorecards
Latin Finance - September/October 2009 - 27
Latin Finance - September/October 2009 - 28
Latin Finance - September/October 2009 - Brazil Liability Management
Latin Finance - September/October 2009 - Real Estate Equity Resurrected
Latin Finance - September/October 2009 - 31
Latin Finance - September/October 2009 - 32
Latin Finance - September/October 2009 - 33
Latin Finance - September/October 2009 - 34
Latin Finance - September/October 2009 - 35
Latin Finance - September/October 2009 - 36
Latin Finance - September/October 2009 - Structured Finance Forecasts
Latin Finance - September/October 2009 - 38
Latin Finance - September/October 2009 - Grim Outlook. Reform Required
Latin Finance - September/October 2009 - 40
Latin Finance - September/October 2009 - 41
Latin Finance - September/October 2009 - 42
Latin Finance - September/October 2009 - 43
Latin Finance - September/October 2009 - 44
Latin Finance - September/October 2009 - Banorte Seeks to Grow
Latin Finance - September/October 2009 - Peru Spending Hits a Block
Latin Finance - September/October 2009 - 47
Latin Finance - September/October 2009 - 48
Latin Finance - September/October 2009 - 49
Latin Finance - September/October 2009 - BCP Sees Better Days
Latin Finance - September/October 2009 - 51
Latin Finance - September/October 2009 - 52
Latin Finance - September/October 2009 - 53
Latin Finance - September/October 2009 - 54
Latin Finance - September/October 2009 - Caribbean Investment Report
Latin Finance - September/October 2009 - 56
Latin Finance - September/October 2009 - 57
Latin Finance - September/October 2009 - 58
Latin Finance - September/October 2009 - 59
Latin Finance - September/October 2009 - 60
Latin Finance - September/October 2009 - 61
Latin Finance - September/October 2009 - 62
Latin Finance - September/October 2009 - 63
Latin Finance - September/October 2009 - 64
Latin Finance - September/October 2009 - 65
Latin Finance - September/October 2009 - 66
Latin Finance - September/October 2009 - Sustainable Banking
Latin Finance - September/October 2009 - 68
Latin Finance - September/October 2009 - Legal Services Survey
Latin Finance - September/October 2009 - 70
Latin Finance - September/October 2009 - 71
Latin Finance - September/October 2009 - 72
Latin Finance - September/October 2009 - 73
Latin Finance - September/October 2009 - 74
Latin Finance - September/October 2009 - 75
Latin Finance - September/October 2009 - 76
Latin Finance - September/October 2009 - 77
Latin Finance - September/October 2009 - 78
Latin Finance - September/October 2009 - Parting Shot
Latin Finance - September/October 2009 - 80
Latin Finance - September/October 2009 - Cover3
Latin Finance - September/October 2009 - Cover4
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