By Rogerio Jelmayer
SAO PAULO--After two months of tepid activity, Brazilian
companies jumped back into the overseas bond market this week, with
two companies raising $1 billion between them, and another handful
of firms lined up behind, as opportunities have emerged in the wake
of a fresh flood of cash from Japan's central bank.
Last week, the Bank of Japan took bold steps to aid the
struggling domestic economy, doubling the amount of money it pumps
into the economy in two years mainly by doubling purchases of
government bonds. Many investors believe that some of the money
will find its way into emerging markets, which can offer juicier
returns than at home.
Nonetheless, access to global markets isn't guaranteed.
International investors still fret about the ongoing debt problems
in the U.S., Europe and Japan, as well as the outlook for global
economic growth, which means access to debt markets can be
intermittent. After a rip-roaring start to the year, Brazilian
overseas issuance was quiet in February and March.
The volume of overseas bonds issues by Brazilian companies and
banks dropped to $8.5 billion in the first quarter, down from $24.7
billion in the same period last year, according to data provider
Dealogic.
That changed this week, as Brazilian long-steel maker Gerdau
S.A. (GGB, GGBR4.BR) and JBS SA (JBSAY, JBSS3.BR), the world's
biggest meat packer by revenue, on Monday raised $1 billion between
them from overseas bonds issues. In both cases, proceeds will be
used to refinance existing debts.
Investment-grade Gerdau raised a total of $750 million from its
overseas bonds issue due 2023, paying an annual yield of 5.125%,
according to a term sheet provided by a fund manager Tuesday. J.P.
Morgan and Morgan Stanley coordinated the operation.
JBS, meanwhile, raised $250 million from the reopening of an
overseas bonds issue also due in 2023. The original operation was
set in January, when the company raised a total of $500 million.
The latest bonds for the junk-rated company will pay an annual
yield of 6.25%. Deutsche Bank, J.P. Morgan and Banco Santander
managed the deal.
Company officials weren't immediately reached for comment.
Issuing bonds in foreign currencies can provide a source of
cheaper funding than at home, as developed markets are close to
record lows, with the U.S. and European central banks' key rates
close to zero. The Brazilian central bank's key rate, the Selic,
stands at a towering 7.25% per year--although that is a historical
low.
Others Brazilian companies that are planning to raise cash via
international debt markets include BTG Pactual, OAS, Aralco and
Banco Fibra, in operations that could amount up to a total of $1
billion, according to an investment banker with knowledge of the
operations.
In part, last year's issuance--which ultimately hit a record
$50.5 billion for the full year--explains the drop in demand this
year, as many companies have already refinanced debts and are in a
more comfortable position this year. There is also the absence--so
far--of on Brazilian heavyweights such as mining giant Vale SA
(VALE) and oil company Petroleo Brasileiro SA (PBR, PETR4.BR), or
Petrobras.
The giant oil company in particular will have to appear at some
point, as it needs to borrow about $15 billion a year to finance
its huge investment program.
According to Renato Ejnisman, director of investment bank
Bradesco BBI, because of the size of Petrobras' needs, it is likely
to bring just a few large, uncomplicated deals to market. It is
unlikely to seek to borrow in unusual currencies, or use complex
structures, he said.
Write to Rogerio Jelmayer at rogerio.jelmayer@dowjones.com