The first international loan syndication for a little-known Brazilian borrower caught GTR‘s eye last year. Diplomata Industrial e Comercial is a poultry company known within Brazil but relatively unknown on the international financial markets.
In July 2007 the company raised US$45mn in a secured export pre-payment that is noteworthy for the complexion of the lenders. Lenders that joined this deal are interesting in that they include both funds and investment banks, some of which are relative newcomers to this type of structured transaction.
Rosemount Capital, in its second year of business, arranged the transaction.
Demand for the deal was strong – it was launched at US$25mn and oversubscribed at US$45mn. “This reflects the strong recovery taking place during 2007 in the meat and poultry sector in Brazil as well as the unique structure of the deal which involved mortgages as well as a pledge of shares in the company,” says Bruce Fields, managing partner at Rosemount Capital Management. “We are starting to see these more creative types of structures for trade-related deals.”
Principal for the loan will be repaid in 10 equal quarterly instalments beginning nine months from disbursement. Interest is payable quarterly.
During the second quarter of 2007, Diplomata was looking to issue its first syndicated loan to the international markets. The company had previously borrowed primarily from local banks or on a bilateral basis with a small group of international lenders, and wanted to expand its funding from international sources to match its growth in export sales.
Rosemount had previously lent directly to the company and had an established relationship. The company competed with international investment banks for the syndication and won the mandate on the basis of structure, pricing and timing of execution, says Fields. Diplomata wanted to close the deal by the end of July – and this was accomplished.
The deal was launched to the market in June at US$25mn and was well received by the market with the deal being oversubscribed and closed out at US$45mn. While certain institutions expressed concern about the publicity surrounding bird flu (which has never touched Brazilian shores) the majority of counterparties who looked at the deal got beyond this in good order, adds Fields.
Diplomata had a very good 2007 and has mandated Rosemount to lead arrange another syndicated loan which is in the market and receiving a very positive reception.
Borrower: Diplomata Industrial e Comercial
MLA and bookrunner: Rosemount Global Trade Finance Fund
Arrangers: Merrill Lynch Credit Products; Standard Bank Plc
Co-arrangers: Dresdner Kleinwort; Landesbank Baden-Wurttemberg
Manager: Growth Management Ltd
Tenor: 3 years
Margin: 4.5% pa
Law firm: Greenberg Traurig (US counsel to arranger and lenders); Velloza, Girotto e Lindenbojm Advogados Associados (Brazilian counsel to arranger and lender); Santos Neto Advogados (Brazilian counsel to borrower)
Date signed: July 2007