Companies find a favorable scenario for funding abroad – 04/23/2023 – Market

The reduction of uncertainties related to the new Brazilian government and the trajectory of the public debt after the announcement of the fiscal framework, added to the final stage of the cycle of high interest rates in the USA, should contribute to local companies seeking financing for their operations out of pocket of major global investors.

In early April, the Brazilian government issued debt securities abroad, in an auction with high demand that raised around US$ 2.25 billion (R$ 11.36 billion). About a week later, it was BB’s (Banco do Brasil) turn to access the international market, raising US$ 750 million (R$ 3.8 billion) in sustainable bonds.

The expectation of financial agents is that the two operations will open the door for other Brazilian companies to also raise funds in the international market in the coming weeks.

“The government’s and BB’s issues open the doors to new operations and give more visibility to demand”, says Lucianna Lorenzo, responsible for the fixed income capital markets team for Brazil at JPMorgan.

She says that global investors accumulated significant volumes of cash resources over the past year and now have their pockets full and are looking for good deals.

“Investors have a lot of cash and are ready to look for good opportunities”, says Lucianna, who estimates that maturities of fixed income securities on the foreign market have surpassed issuances by almost US$ 300 billion (R$ 1.5 trillion) in 2022. “Operations [do governo brasileiro e do BB] were well received, and the market is open”, he adds.

Responsible for the capital markets area at BNP Paribas for Latin America, André de Miranda e Silva says that abundant liquidity is an important point in favor of issuing companies. With investors with cash in hand and few offers on the street, it is easier for companies to capture larger volumes with lower interest rates, says Silva.

Sources indicate that BTG Pactual would have an ongoing process to access the foreign market via debt issuance. Sought, the bank did not comment.

Petrobras, Itaú and Suzano are also names among those with the potential to access the international market in search of resources in the current window.

Responsible for the international fixed income area at Itaú BBA, Pedro Rodrigues estimates, based on the history of previous years, a volume between US$ 10 billion (R$ 50.5 billion) and US$ 15 billion (R$ 75.7 billion ) in issues by the government and by Brazilian companies abroad during this year.

Rodrigues says that the reduction of uncertainties related to the country, with the definition of the elections at the end of last year, and, more recently, with the signs about the new set of tax rules, helps Brazilian companies gain access to the foreign market. “I’m not seeing many structural things that could make Brazil’s situation much worse.”

Responsible for the debt market area at Credit Suisse Brasil, Rodrigo Fittipaldi says that he sees foreign investors as having a more positive view of Brazil than local investors.

“Locals are generally more fearful than foreigners”, says Fittipaldi. While Brazilian investors show greater concern with aspects such as fiscal policy and the crisis of companies such as Americanas and Light, foreign investors, who have a more global vision, see Brazil, among emerging countries, as a still attractive region, especially if compared to countries like Russia, says the Credit Suisse executive.

Rodrigues, from Itaú BBA, adds that the volume to be raised by Brazilian companies in the international market will also be influenced by the dynamics of the local capital market.

The episode involving Americanas and the fear of a credit crisis in the country kept the Brazilian capital market averse to new operations, but an improvement in mood has already begun to be observed in recent weeks, says the Itaú BBA manager. And, if we have a reopening of the local market ahead, the demand for emissions abroad tends to decrease, says the expert.

The end of the US interest rate hike favors a heated market

Rodrigues also says that the resumption of issuances abroad is also related to the interest rate cycle in the United States.

This is because, with the process of increasing the basic rate by the Fed (Federal Reserve, US central bank) already at an advanced stage, the risk of investors suffering significant losses in fixed income securities due to the mark-to-market effect is lower , which is the fall in asset prices as interest rates rise.

“What did the window [de captações no exterior] to open again is the perspective that the policy of raising global interest rates is coming to an end”, endorses Silva, from BNP Paribas. this cycle is coming to an end, it brought stability that broadcasters need to return to the market, adds Silva.

Lucianna, from JPMorgan, points out, however, that the window for Brazilian companies to raise funds abroad may be short. This is because, depending on the next inflation data in the United States, it is still not possible to rule out the possibility of new rounds of increased stress and higher interest rates on US government bonds, with a retraction in investor demand and less space for funding. of Brazilian companies, says the specialist.

Head of international debt capital markets at Bradesco BBI, Gilberto Nakayasu says that, instead of a window, what he sees is, in fact, a “gap” for well-established companies that are already known to global investors to be able to access the market, against a volatility that tends to remain high in a scenario of still high interest rates and low growth of the global economy.

“New offerings are feasible, but for frequent issuers, better known in the market, with strong ratings.”