Early this week, Brazil's Gerdau and its soon-to-be merged subsidiary Acominas are expected to close an export deal in the cross-border market that will probably be sized near US$100 million, though it could turn out larger. "We haven't defined how big the first tranche is going to be," said Gerdau CFO Osvaldo Schirmer. Fitch Ratings has approved up to US$250 million under the preliminary rating of BBB-'.
Lead JPMorgan Securities completed the roadshow for the transaction last week. Targeting the private placement market, the deal is backed by future receivables generated from steel-related exports. Proceeds are going to enhance the debt profile. "We are refinancing some short-term debt," Schirmer said.
The CFO expressed confidence that investors would welcome the transaction, particularly in light of the issuer's "track record and commitment to its export (markets)."
Shearman & Sterling is counsel for the deal.
Should the transaction close this week as planned, it will beat a rush of structured Brazilian issuers predicted for the summer if propitious conditions hold. JPMorgan itself has another transaction in the works for iron ore producer CVRD, with MBIA heard to be wrapping part or all of that deal. Other Brazilians lining up are Visanet (see article), pulp producer Aracruz and steel producer CSN. BCP Telecomunicacoes is heard courting banks as well for a potential securitization farther down the road.
While cross-border securitization has been quiet this year so far, a barrage of Latin issuance has rolled into the plain-vanilla market. Structured dealmakers do not appear to be overly anxious of overstuffed investors; at least not yet. "It depends on who you talk to because some like the export deals and other the financial future flows," offered one analyst. "That said, I can see it getting saturated in the next 30-60 days."