Brazilian companies are moving ahead into the year with several deals in the pipeline, putting them right on target as the dominant Latin American issuer.

State-owned oil giant Petrobras is in the market with its fourth transaction, expected to launch later this month. The deal, led by JPMorgan, is expected to be a replication of the company's three previous transactions. Petrobras International Finance Company (PIFCO), an offshore subsidiary that imports the oil for Petrobras, will issue up to $500 million in debt.

And, like the last transaction, this deal will also provide a letter of credit from Barclays that will provide coverage for transfer and convertibility risk. This is also expected to be the longest deal yet, with a 15-to 20-year maturity. Petrobras' last transaction, a five-year deal led by UBS Warburg and Morgan Stanley, featured bonds that were backed with a letter of credit from BBVA, which also guaranteed coupon payments in the event of inconvertibility.

Although political risk insurance has traditionally signified that an insurance company will step in to pay creditors if the government were to impose foreign-exchange controls interfering with debt payments, rumors in the market suggest that many political risk insurers have reached their limits as to the amount of insurance they can provide in Brazil and to Petrobras in general. As a result, the letter of credit political risk coverage is becoming a bit trendy, sources say.

Banco Central do Brasil is also a repeat issuer dangling in the market with another MT100 transaction of the same breed as the one it issued last year that gave way for other Latin American companies to follow suit. While the details of the company's third transaction remain to be seen, the issuance amount is expected to reach between $200 million and $250 million and will be issued off of the company's existing program.

Merrill Lynch brought Banco Central do Brasil's first transaction to market, which made history as the country's first-ever financial future flow transaction. The first deal was a $250 million fixed-rate, worker-remittance deal in which Nikkei Remittance Trust was established in Banco Central do Brasil in Japan. Brazilians working in Japan were then able to deposit yen or American dollars into the trust and the money was then transferred to the assigned account in Brazil in real (see ASR 07/23/01).

Although Merrill also led the second transaction from Banco do Brasil last year, it is still unknown which company will be leading the third transaction. However, market sources say that the Banco do Brasil is looking to reduce costs this time around.

Brazil's major telecommunications company, Tele Norte Leste Participacoes SA (TNE), or Telemar, is also in the market with a deal similar to Petrobras. The transaction, also led by JPMorgan, is expected to feature a letter of credit providing coverage for transfer and convertibility risk from ABN AMRO. Telemar's offering is also rumored to be a five-year deal between $300 million and $500 million.

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