Brazilian companies raise US$4.6 billion in corporate bonds in 10 days

RIO DE JANEIRO, BRAZIL – A new wave of risk-taking appetite by foreign investors, coupled with a scarcity of assets with interesting returns, fueled a fundraising sequence by Brazilian companies over the past 10 days. Transactions totaled US$4.6 billion.

In the coming days, Stone and Light should raise funds and the success is expected to be maintained. Stone aims to raise around US$500 million and US$750 million, while Light should raise up to US$600 million.

In other words, the amount of funding from Brazilian companies will jump to nearly US$6 billion next week.

By the end of July, at least 3 other bond issues are planned, involving up to US$4 billion. Brazilian issuers had put on hold plans to raise money abroad in recent months amid domestic turmoil over the pandemic and the increase in U.S. interest rates in the wake of inflation concerns in the United States.

The turnaround occurred over the past three weeks, when the North American interest rate (Treasury) volatility stabilized, says Pedro Frade, Itaú BBA’s head of external debt. “With the Treasury more stable, we saw investors resuming their appetite for risk, and Brazil benefited, especially because it has better relative value than other countries in the region facing turbulence with domestic issues,” he says.

The volume of orders that the 5 Brazilian companies offering bonds abroad had during the process of selling them is most notable. In all, there were US$24.4 billion in purchase orders registered for the issues by Petrobras, PetroRio, JBS, CSN and Azul.

For some companies, such as CSN and Azul, investors did not pull their orders even when issuers decided to reduce the rate of return, which is quite common. “The issuances have resumed at a very solid and technically favorable moment,” says Philip Searson, Bradesco BBI’s head of debt markets. The BBI executive believes that the positive moment will run until the end of the year.

The fact that many companies are withdrawing bonds from the market, with the repurchase of the most expensive ones, are also leading new fundraising operations to become very competitive, says Frade from Itaú BBA. “There have been 21 offerings this year, with close to US$13 billion issued, and half of them coupled with buybacks.”