Brazil's Bond Sales Have Strong Quarter as Firms Tender Debt

(Bloomberg) -- The third quarter is already the strongest of the year for Brazilian corporate dollar bond sales as firms tap the market amid a wave of debt buyback deals. Even with no sales in August, companies in Latin America’s largest economy sold more than $4.8 billion in greenback-denominated notes since the beginning of July, surpassing the $4.6 billion and $3.8 billion sold in the first and second quarters respectively, according to data compiled by Bloomberg that excludes self-led deals.

The bond rush comes as Latin America catches up with other emerging markets that have sold record amounts of debt this year, taking advantage of global liquidity as central banks try to offset the impact of the pandemic. Food processor BRF SA was the latest Brazilian company to tap international debt markets with a $500 million, 30-year bond sale. The food company paid a 5.875% yield, less than the mid-6% initial target, and will use part of the proceeds of the deal to finance a tender offer for shorter notes due in 2022, 2023, 2024 and 2026 that have coupons ranging from 2.75% to 4.75%. “We saw a great demand coming from the U.S., Europe and Asia,” Carlos Moura, BRF’s chief financial officer, said in an interview. Demand for the bonds was more than 10 times higher than the amount offered, according to Moura. Pulp maker Suzano SA did a similar transaction, selling $750 million in bonds due in 2031 at a 3.95% yield. The amount will be used to fund the tender offer opened earlier this month for notes due in 2024, 2025 and 2026 that pay coupons of as much as 5.75%.

Iron ore company Vale SA said it would pre-pay $5 billion of its revolving credit lines that were disbursed in March 2020 and would mature between June 2022 and December 2024. The miner sold $1.5 billion in 10-year dollar bonds in early July after more than three years absent from the overseas debt market. State-run companies are also anticipating debt payments. Oil producer Petrobras bought back for cash $3.5 billion bonds expiring between 2022 and 2034 and lender Banco do Brasil SA announced it will redeem 100% of its perpetual bonds that pay a 8.5% coupon on Oct. 20.

“Investors are fighting for investment opportunities with a little bit more yield,” said Soummo Mukherjee, senior credit analyst at Lucror Analytics in Florida. He said companies rated single B are also tapping the market next week, including Petro Rio SA, which doesn’t have bonds outstanding and announced the intention to sell dollar bonds due in 2025 to pre-pay debt. “If they price the deals, it’ll be clear there’s a lot of money available in the world,” he said.

By Aline Oyamada and Tatiana Freitas