More and more Brazilian power companies are warming up to receivables investment funds (FIDCs) as a funding vehicle. The Cataguazes group - made up of five electricity distributors - has a R$240 million ($84 million) fund on the horizon, according to a source familiar with the issuer. Santander is reportedly lead bookrunner and Unibanco and Banco Itau BBA co-managers on a transaction with a senior piece worth R$210 million and subordinated notes of R$30 million. Standard & Poor's and local agency Austin are rating the deal, which should achieve a level at or near AA' on the national scale, the source said.

The transaction is closed-ended, with a likely maturity of three months.

The Cataguazes group is comprised of Cataguazes-Leopoldina, CENF, Energipe, and Saelpa, and Companhia Energetica de Borborema.

A fund originated by Companhia Energetica de Sao Paulo (CESP) is even closer to issuance, pending regulatory approval. Initially sized at R$315 million, the deal has been markedly upsized to R$472.5 million, with a senior tranche of R$450 million. Joint leads are Banco Bradesco, Itau BBA, and Banco ABC Brasil and the tenor is five years.

The collateral is made up of existing and future receivables from freely negotiated contracts with heavy-usage consumers. Brazilian regulators are holding the transaction back as they generally require that a guaranty be attached to future flow deals in the domestic market and this transaction carries none. This is a flexible stipulation, however, and the parties involved are putting forth their case. The deal is expected to eventually pass muster in its current uninsured form, sources said. In a sign of confidence, the arrangers apparently took the structure on an unofficial roadshow last week to Sao Paulo and Rio de Janeiro.

As it stands, the deal has a brAA-f' national-scale rating from S&P, quite a feat for CESP, rated a dismal brCCC'. Mattos Filho, Veiga Filho, Marrey Jr. & Quiroga is counsel for the arrangers.

Copyright 2004 Thomson Media Inc. All Rights Reserved.

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