Latin Finance - March/April 2011 - 56

Brazil infrastructure financing innovation

Suppliers in the FIDCs as of February include equipment inspector Araújo Engenharia e Integredade de Equipamentos, engineer Cemon Engenharia, builder Metalfort, geological analyst Georadar Levantamentos Geofísicos and drilling specialist Steam & Drilling.

FIDCs can take a long time to close. In the pipeline since last year were a 150 million real five-year transaction structured by Banif, a 100 million real four-year deal from BTG Pactual, and a 100 million real four-year FIDC from BI Investimentos and HSBC. Petrobras’ Miranda says additional replications are already Freeing Up Funds in the pipeline, with at least eight funds set to raise more than A new FIDC supported by Petrobras and arraigned by financial 8.0 billion reais. specialty and private equity firm Plural Capital was approved in “The strength of Petrobras is a big driver, but there are January. Like other FIDCs – deals in the class have most often many good companies with great creditworthiness and solid involved consumer lending – the transaction creates a fund to market position,” says Juan De Mollein, managing director for purchase credit receivables, in this case supplier contracts with structured finance at S&P. Petrobras. This transaction is an example of using a structure, FIDC, “The FIDC allows the suppliers to raise funds without that investors are familiar with to get funding to companies they incurring more debt may be less familiar on their own balance with, De Mollein sheets,” says Miranda. says. It could even be This frees them up to replicated beyond the devote more funds to Petrobras sphere, he investment. says, in the case of The 300 million real exporters and energy four-year transaction is companies that offer structured by Plural with similar supply and Caixa Econômica Federal service contracts. A 218 managing placement million real FIDC for and distribution. It Volkswagen suppliers includes a 237 million has been approved by real senior tranche sold regulators. to investors, as well Plural is also as two 30 million real looking to fund others subordinated pieces in the infrastructure bought by Petrobras and space. It is structuring a Plural. Fundo de Investimento Participation by the em Participações (FIP) oil giant is crucial to equity vehicle to invest Pumping Brazil’s oil: thousands of Petrobras suppliers need funding increasing the chance of in infrastructuresuccess, analysts say. In related companies, addition to Petrobras being the source of contract payment, its Tupinambá says. This would not be limited to the oil sector, and participation in the subordinated portion also protects investors. is slated to close this year. Petrobras credit risk would be considered AAA on a national scale, but there is still performance risk at each of the suppliers, Closing the Duration Gap many of which lack long operating histories. The transaction is São Paulo-based fund manager Vinci Partners is trying to push rated A on a national scale and expected to close in the first half. the use of FIDC-supported infrastructure funding longer. It is The FIDC was expected to pay 125% of the DI benchmark, which preparing a 10-year transaction, which should also close in the was at 11.15% mid-February. first half of 2011. “We are trying to create an improvement in the quality and Vinci officials decline to comment on the transaction, but the number of suppliers who could get this financing,” says regulatory documents indicated that the 2.0 billion real deal Humberto Tupinambá, a partner at Plural responsible for oil and would have a fund to lend to infrastructure companies. It plans gas sector coverage. to make loans to companies and specific projects in Brazil during the first four years, with the ability to offer debentures, Immediate Credit promissory notes, export credit notes and other products The Plural deal is made up of credits from 40 suppliers, though commonly offered by banks in the Brazilian bank and DCM Tupinambá says more than 100 were interested. A key to the markets. structure is that Plural is able to give suppliers immediate credit Holders of a 1.5 billion reais senior tranche will get the ICPA through cédulas de crédito bancário (CCB) loans, he says. These inflation rate (5.9% at year end 2010) plus 8.0%. Investors in a are replaced with cash once sale of payment rights is completed. 350 million reais mezzanine piece will meanwhile receive ICPA

56 LatinFinance

March/April 2011

Latin Finance - March/April 2011

Table of Contents for the Digital Edition of Latin Finance - March/April 2011