Brazilian companies have once again evaluated the sale of shares or the refinancing of debt as electoral uncertainties, which paralyzed these negotiations, give rise to optimism after the election of the market’s preferred candidate Jair Bolsonaro as president of the Republic, they said five people familiar with the matter to Reuters.
One source, who asked for anonymity to give details of the stealthy deals, said up to 10 companies are discussing with investment bankers the sale of shares and another five companies are evaluating bonus deals through January.
“Banks are advising companies to access capital markets by the end of the year or in the first quarter of 2019 during the investors’ honeymoon with Bolsonaro’s commitment to market-friendly policies,” the source added. “It’s hard to say how long (the honeymoon) will last.”
Signs of a resurgence in the post-election capital market underscore the role that political risk and uncertainty play in investors’ decisions about corporate debt and equities in Brazil, Latin America’s largest economy.
Some stock offerings planned for the coming months were already underway, but had to be suspended because of pre-election volatility.
Among the companies planning initial public offerings by the end of the year are medium-sized bank BMG and information technology company Tivit Outsourcing Processes, Services and Technology.
Power holding company Neoenergia, controlled by Spain’s Iberdrola, may also try an IPO in the first quarter, two of the sources who requested anonymity said. Neoenergia’s offer was suspended twice in the last two years because shareholders could not get the value they wanted.
Electricity distributor Light, already listed, also revealed plans for a stock offer.
Last year, 34 companies raised $12.8 billion with stock offerings, according to Refinitiv data. So far this year, the amount raised was only half that — $6.3 billion in 14 offers.
After the election, a greater number of listed companies in Brazil can benefit from better market conditions to raise capital.
The sources said energy companies such as Equatorial Energia and Energisa, which need capital to fund acquisitions and tenders at government auctions, could sell additional shares. Energisa and Equatorial did not comment on the matter.
Refinancing of Debts
Corporate debt may also experience a rebirth thanks to Bolsonaro’s victory.
Brazilian bond issues abroad, including sovereign instruments, totaled US $17 billion through September, down 53 percent from the same period last year.
Last month, as the Bolsonaro election became more likely, Brazil’s five-year credit default swaps (CDS) fell 21 percent. CDS is a financial derivative that effectively functions as an insurance against non-payment of securities and other credit instruments.
The Brazilian sovereign spread on Treasury yields closed at 228 basis points on Thursday.
The sources said Brazil’s biggest issuers should seize the opportunity to refinance debt on more favorable terms.
First company to offer securities after the election may be the infrastructure company Invepar, which is expected to put $650 million in bonds as of next week. Invepar has postponed its October offers for this month and is still in talks with investors, who have demanded yields of up to 10 percent.
Invepar did not comment immediately on the matter.
Petrobras announced on Wednesday that it refinanced $1 billion in lower-cost bank lending.
To date, Petrobras has not announced any new issue.
Another company that is reducing the cost of debt is mining company Vale, the bankers said. Vale’s financial vice president, Luciano Siani, said in an interview that the company had reached its net debt target ahead of schedule. The company is wary of new debt because of rising benchmark interest rates in the United States.