LatinFinance - March/April 2015 - 7

NEWS
LOANS

Energy companies and Brazilian borrowers are finding
bank funds available, despite the external conditions.
By Patrick Ferguson

Liquidity rules
Typically the syndicated
loans market takes some
time to gain momentum in
January, but this year has been
unusually slow.
The market remains high
liquid. Yet uncertainty in
European markets, lower
global growth prospects, low
commodity prices and an
expected hike in US interest
rates around mid-year are
causing market participants to
proceed with caution. Those
factors are also dampening
activity in mergers and
acquisitions - which is in turn
driving less lending activity
than might be expected.
Brazil's situation is also
causing lenders to tread
carefully. The South American
country's 2015 economic
growth forecast have been
slashed, and expectations
are now that it will enter
recession this year. The
lowered expectations coincide
with major investigations
into corruption allegations at
Brazil's state-owned energy
Petrobras. The scandal has
impeded financing for the oil
company and several of its
contractors, including OAS.
Nonetheless, in January
more than a dozen bank
submitted proposals to
syndicate a $700m loan for
Brazil's Raízen Energia. The
loan was the first big deal of
the year and attracted banks
ready to put their new budgets
to work.
Market talk suggested the

borrower was discussing
paying as little as 100bp over
Libor for the possible five-year
dual-tranche deal, a level
said to be very tight for the
borrower. Pricing emerged
higher at 120bp over Libor,
which was still described as
aggressive. Syndication on the
deal is set to begin in March.
Brazil's troubles go on,
though. A severe drought,
which has been called the
worst in Brazil history, has
wreaked havoc on agricultural
producers and communities,
causing water cuts and
blackouts. Brazilian sugar
producer Usina de Açucar
Santa Terezinha was heard
to be preparing to close
documentation for a $150m
loan in mid-February. The
four-year pre-export term
loan paid 390bp over Libor,
LatinFinance heard. That was
slightly above the 340bp over
Libor the company paid in
March 2014 for a $180m preexport loan with the same
tenor.

Oily appetite

Despite low oil prices,
companies in the industry
have taken some of the largest
loans this year. That suggests
banks are still happy to lend to
companies with strong credit
profiles despite the dive in the
price of the commodity.
Colombia's Canacol
Energy Company was
seeking syndication for a
$200m loan in late February.

Loans rank by volume, year to February 23
Asia and Europe dominate
Rank
1
2
2
2
5
5
5
5
5
10

Bookrunner
HSBC
Mizuho
JPMorgan
BNP Paribas
Sumitomo Mitsui
Société Générale
Natixis
MUFG
Credit Agricole
BBVA

Value ($m)
954
904
904
904
583
583
583
583
583
371
7,494

Total

No. Deals
3
2
2
2
1
1
1
1
1
2
4

Source: Dealogic

The deal follows a deal for
Colombia's state-owned oil
company Ecopetrol, which
closed a $1.92bn club deal in
February with eight banks. The
five-year, term loan paid 140bp
over Libor.
Investors and companies
had thought 2015 would offer
the beginning of a deal boom
in the oil and gas industry
in Mexico, which passed
legislation to allow joint
ventures between Mexican
and international companies in
August. The fall in the oil price
is causing analysts to revise

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their forecasts on the speed at
which investors will come into
opportunities created by the
energy reform.
Yet the lending proceeds.
In February, Pemex, the
government's state-owned
energy company, closed a
$5.25bn, triple-tranche loan
it had entered syndication
for in December. More than
20 banks participated in the
credit, which was finalized just
as Pemex' cut its budget by
more than 11% because of lower
oil prices and weaker-thanexpected revenues. LF

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March/April 2015 - L ATINFINA NCE.COM 7
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LatinFinance - March/April 2015

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