Biggest in Brazil
Lead arrangers and bookrunners ABN Amro, BBVA, BNP Paribas, Citigroup and Santander closed a US$1.2bn facility for Votorantim, one of the largest commodity producers in Brazil, in June. This was, at the time, the largest syndicated facility ever arranged for a Brazilian group and the longest tenor widely syndicated in that market.
The Votorantim facility offered a comprehensive package, refinancing a number of existing loans, thus extending and streamlining Votorantim’s debt profile. The facility has a hybrid structure, combining pre-export financing tranches and unsecured working capital financing so as to optimally tap the bank market and is secured by future export flows.
“This deal represents the largest syndicated pre-export related Brazilian transaction closed in 2006,” says Erich Michel, senior vice-president, head of trade and export finance, at BBVA New York. “The deal exemplifies the tremendous efforts made among BBVA’s product units in New York to working closely together with colleagues in Brazil and Spain in order to create and jointly present, together with all other MLAs, the winning structured financing solution to the client. The structure of the transaction includes a certain mitigation of payment risk through the establishment of a first priority interest in designated export receivables, sales contracts, export agreements, collateral account and any proceeds thereof, which enhances the quality of the asset and provides the lenders with certain control over the flow of payments made by various buyers of the client’s products”.
The market appetite for Brazilian assets and related pricing fall, along with an investment grade rating by Standard and Poor’s obtained in November 2005, led Votorantim to launch an extensive bidding process for the refinancing of a substantial portion of its bank debt earlier in 2006.
The US$1.2bn loan consists of two separate facilities, each evenly split into three-year, 5.5-year and 8-year tranches. There is a US$825mn pre-export facility (including a US$200mn three-year unsecured working capital tranche) to Votorantrade, guaranteed by VPAR, the group’s holding company, secured by metals, softs and chemical products export flows; plus a US$375mn pre-export facility to VCP Overseas, guaranteed by Votorantim Celulose e Papel (VCP), the paper and pulp company, and the only listed company of the group, secured by pulp and paper export flows.
“The total financing was organised in order to have a smooth amortisation structure – thus three tranches for each loan was negotiated. The distribution was via an arranger tier in which pro rata commitments amongst facilities and tranches were required. In the general, lenders were able to commit to either facility or to a combination of tranches. The transaction was very successful in the three and five-year tranches, while liquidity was restricted in the eight-year tranche,” adds Michael Lopez, director, syndicated loans, Americas, BBVA Securities, New York.
Despite being aggressive in terms of tenor and pricing, the facility was well received by the bank market. Syndication was successful with 10 banks joining the lead arrangers. The facility was closed on June 30 2006.
Votorantim is one of the largest privately held industrial conglomerates in Latin America. Its core companies are leaders or major players in all of their markets, including cement, pulp, paper, zinc, nickel, aluminium, non-flat steel, bi-oriented polypropylene, specialty chemicals and frozen concentrated orange juice. Votorantim is also a participant in the financial sector, through Banco Votorantim, and has a presence in the energy sector, both directly, through generation for its own consumption, and indirectly, through minority stakes in public utility distribution companies.
Votorantim supplies markets around the world. Due to the international expansion of its cement business, its assets now include overseas plants in Canada and the US, which help diversify risk and generate hard currency revenue flows.
VCP’s previous approach to the loan market in 2005, a US$280mn senior secured export-backed facility with a fee of 135bp, was also popular with lenders, and was oversubscribed to US$350mn.
Borrowers: Votorantrade; VCP Overseas
Split into: Facility A – US$825mn pre-export finance to Votorantrade (including US$200mn working capital tranche); Facility B – US$375mn pre-export finance to VCP Overseas
Mandated lead arrangers: ABN AMRO; BBVA; BNP Paribas; Citibank; Santander
Lenders: Bank of America; Bank of Tokyo-Mitsubishi UFJ; Bradesco; Calyon; Dresdner Bank; HSBC; Mizuho; Nordea; San Paolo IMI; Société Générale
Tenor: 3yr; 5.5yr; 8yr
Votorantrade: 3yr pre-export – 25bp; 5.5yr – 42.5bp; 8yr – 70bp; 3yr working cap – 40bp
VCP Overseas: 3yr – 25bp; 5.5yr – 42.5bp; 8yr – 75bp
Law firms: Hughes Hubbard & Reed (lenders); White & Case (borrowers)
Exporters : Citrovita Agro Industrial; Cia Nitro QuíÂmica Brasileira; Cia NíÂquel Tocantins; Votorantim Metais Zinco; Companhia Brasileira de AlumíÂnio – CBA; Votorantim Metais; VCP Votorantim Celulose e Papel
Date closed: June 2006