Brazil's markets on standby
The country's equity markets have slowed while corporate issuers postpone possible bond issues both at home and abroad
Brazil's markets are stuck in standby after the latest
political crisis delayed the government's reform efforts, but
they have not come to a complete standstill.
"The capital markets are not stopping, and investors are
starting to call us again," said a banker in Sao Paulo. "Some
issuers stepped on the brakes, but we had the follow-on from BR
Malls and the filing from Carrefour."
BR Malls raised BRL1.73bn ($531m) from an equity
offering last week, just days after President Micheal Temer
reportedly endorsed hush money payments for the former speaker
of the house, Eduardo Cunha.
The mall operator sold the shares in the follow-on offering
for BRL11 each. BR Mall's shares have since gone as high as
BRL12.18 and closed at BRL12.12 on Friday, up 2.45% on the
Carrefour said it plans to list the
subsidiary Atacadao on the local stock market in July. The
French retailer acquired the wholesale hypermarket for BRL2.2bn
"The market was not as scared as we expected," the banker
But not everyone followed through on plans to return to the
equity market. Ser Educacional was looking to raise roughly
$120m from a follow-on offering but it cancelled
the deal last week, saying the share price did not reflect the
company's expected profitability.
On the debt side, corporate issuers have postponed possible
bond issues, both at home and in the cross-border markets,
"All the banks have stopped transactions and are repricing
them," a CFO in Sao Paulo said about upcoming bond issues in
the local market. "Issuers will now have to pay higher
A second banker said the international bond markets have
shut temporarily for Brazil's corporate issuers but he added
that none of the big companies had a pressing need to raise
financing or buy back existing notes.
Petrobras, for example, added $4bn to
three bonds in the market just days before the scandal hit the
Other companies, such as high-yield and first-time issuers,
will have to wait, but the government will not have to return
with a benchmark bond to reopen the market for the private
sector, the banker said.
"The crisis in Brazil is going to lead to repricing, which
has already happened, but it's not going to close the market,"
Cemig finds itself in a more serious situation, with bank
loans and bonds maturing this year, the banker said. The power
company finished a roadshow earlier this month but decided to hold off on
issuing a cross-border bond.
Cemig has not ruled out an international bond sale this year
but it could also
raise debt in the local capital markets.
"It's a name to watch closely but now it has missed its
chance," the banker said.