Drawing on an existing receivables program, Brazilian pulp potentate Aracruz Celulose priced a US$175 million deal on April 30 at 6.361%. Going ABS in the lead-up to a Fed tightening made the most sense, said Chief Financial Officer Isac Zagury. "The type of buyers in this aren't so sensitive to interest rates," he said, noting that straight bonds among emerging markets had suffered more from rate anxiety than structured deals.

Demand of US$250 million even prompted Aracruz to throw another US$25 million on top of the US$150 million originally planned, Zagury said. JPMorgan Securities was lead, a switch from Citigroup, which handled the last ABS by Aracruz, a US$400 million deal tapping the same program via vehicle Arcel Finance. The group of investors was basically the same, with a couple of newcomers.  

Among the legal counsel on the deal, Greenberg Traurig and Levy & Salomao advised Aracruz on the cross-border and domestic sides, respectively. Dewey Ballantine was counsel for JPMorgan.

The recent deal concludes the company's financing plan for 2004. Its legal final maturity of eight years and expected tenor of five years also pushes out the debt profile. Proceeds are going to refinance shorter-term loans.  

Moody's Investors Service, Standard & Poor's and Fitch Ratings rated the issue 'Baa3', 'BBB-' and 'BBB', respectively, identical to the prior placement. A couple of days before pricing, Moody's returned the outlook to stable from negative on the company's global local currency rating of 'Baa3'. The agency cited "a significant improvement in Aracruz's liquidity and overall debt profile" as propping up the brighter outlook.  

Backing the transaction are U.S. dollar-denominated existing and future receivables stemming from export sales of bleached eucalyptus kraft market pulp (BEKP) to all customers of Panama-based Aracruz Trading and Aracruz Trading Hungary. The company sells roughly 98% of its output abroad.  

The company expects to churn out 2.4 million tons of paper pulp in 2004. Looking to grab a larger piece of the commodities-craving markets of Asia, it has set up distribution centers in China and Malaysia.

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