For unclear reasons, bankers are reportedly rushing a $300 million export-receivables deal from Brazil's Grupo Votorantim, one of the largest industrial companies worldwide. ABN Amro, Citibank and Fleet Boston are arranging the deal that will be sold to a syndicate of banks, as opposed to a bond offering.
While export-receivable transactions are not uncommon for Brazil, and some sources argue that they just may be the wave of the future, this transaction will mark the longest tenor yet, with a five-year maturity and a two-year grace period. Additionally, Standard and Poor's is expected to rate the tightly structured deal triple-B.
Grupo Votorantim has established Votorantrade, an offshore special purpose vehicle that will create resale contracts with various buyers in OECD (Organization of Economic and Cooperation and Development) countries. Political risk insurance and other forms of guarantees, including standby letters of credit from single-A or better-rated banks, are among the components in the transaction. Additionally, there is an offshore escrow account in which the prepayments for the exports are held for the life of the loan in order to ensure that servicing and amortization requirements are met.
The transaction is expected to close by the end of August. "For some reason, this came together in a big hurry and it's very complex," a market participant said. "As we go through this and ask questions, they are saying We are still working on this and we are still negotiating that' and we are thinking, why didn't you wait to bring this to market?"
Although the Argentine contagion may be the fuel behind the rush, one market participant was not sure if that was reason enough. "I think there might have been a sense of rush because of the Argentine turbulence, but it was already turbulent, so I don't know if that's a reasonable answer."
Financing for the trade is being arranged parallel with an acquisition financing of a U.S.-based cement company. Votorantim is also establishing a second facility to back the acquisition. Reportedly, the separate facilities were packaged together, however investors were wary of the trade receivables and the facilities were therefore split.