Coordinating and mandated lead arrangers Bank of America Merrill Lynch, Deutsche Bank and JP Morgan arranged and syndicated a US$1.175bn secured export-backed facility for Aracruz Trading International, fully guaranteed by Fibria Celulose, which closed on November 25, last year.

The deal marked the first broadly syndicated trade finance loan raised in Brazil since the financial crisis started in September 2008. It was also only the second broadly syndicated trade finance loan closed in Latin America in 2009.

Fibria is the result of the merger between Aracruz and Votorantim Celulose e Papel and is the world’s largest market pulp producer with approximately 37% global market share in eucalyptus pulp.This facility has also been of key importance to the company in helping it reduce its leverage, and in turn helping it maintain its global presence.

The facility consists of a five-year US$750mn amortising tranche and a seven-year US$425mn amortising tranche. The margin on both tranches is tied to a leverage ratio, and if the leverage ratio of the company decreases so does the margin.

The ratio used is net debt to EBITDA [earnings before interest, tax, depreciation and amortisation], and the initial margin is 4.00% and 4.25% for the five-year and seven-year tranches respectively. The facility is one of three different components which form part of Fibria’s liability management plan, which ultimately aims to support the company in recovering its investment grade rating. Fibria has also secured an international bond issuance of US$1bn and a US$1.4bn asset sale.

Through this liability management process, the borrower aims to reduce its leverage, increase the average life of its debt, smooth its debt maturity profile (eliminating short and medium-term refinancing risk), and continue with its investment programme, growth and expansion.

Joao Galvao, director of structured trade & export finance, at Deutsche Bank New York, elaborates on the benefits of these efforts to support the company’s liability management plans: “Thanks to intense teamwork between the mandated lead arrangers and the different banks, the client benefited from a seamless and comprehensive solution enabling it to give an important step towards the recovering of its investment grade rating.”

Remarking on the strength and future of the company, he adds: “The strong fundamentals of the Brazilian pulp and paper industry and the company, together with a well laid out liability management plan, outweigh any concerns with the leveraged position of the company and the long-term aspect of the facility.”

Juan Martín, managing director and head of trade distribution & EM loan trading Americas, at Deutsche Bank New York, elaborates on the market’s reception of the deal: “Despite the deal being a challenging one due to its size, nature, company’s leverage and the market conditions, the bank market received it in a very positive way. We targeted a broad group of banks which expressed strong appetite and oversubscribed the deal, with a total of 12 participating with significant tickets. I believe the banks based their participation on the company’s strong fundamentals, the liability management plan being reasonable and the confidence that Fibra is one of the top names in Brazil and will remain as such.”

Deal information



Borrower: Fibria Celulose
Amount: US$1.175bn
Coordinating mandated lead arrangers: Bank of America Merrill Lynch, Deutsche Bank, JP Morgan
Mandated lead arrangers: Banco do Brasil, BNP Paribas, Bradesco, Crédit
Agricole CIB, ING.
Margin: L+4.00% (tranche A); L+4.25% (tranche B)
Tenor: 5 years (tranche A) and 7 years (tranche B)
Date signed: November 25, 2009