The Inter-American Development Bank (IADB) has approved a partial credit guarantee for up to US$28mn for the issuance of a five year structured corporate bond of up to R$300mn to Construtora Norberto Odebrecht in Brazil.


This bond will be the first structured receivables transaction with a partial credit guarantee from a multilateral institution to be issued in the Brazilian capital markets.


The bond will be placed in the domestic capital market by a subsidiary of Construtora Norberto Odebrecht, a leading Brazilian engineering and construction company. The IADB partial credit guarantee will cover up to 25% of the bond issue and will help the company secure local currency funding at longer tenors that it could normally obtain in the market.


“The IADB guarantee will set a precedent for future structured transactions in the local and regional capital markets by providing a benchmark for local investors who have limited access to such securities,” says Peter Stevenson, the IADB project team leader. “It will also increase local investors “understanding of these types of structured transactions, and it will attract institutional investors who previously had limited access to private securities.”


“This project will allow rating agencies to apply newly developed rating criteria, it will lead to an increase in the average tenor of local currency bonds and an increase in the volume of private sector bonds. It will create an additional financial instrument for portfolio risk diversification,” Stevenson concludes.


Brazilian companies have traditionally issued debt in foreign markets because of low borrowing rates. Only in the past three-to-four years have a handful of Brazilian companies begun to issue term debt domestically.