SAO PAULO (Reuters) - Brazilian companies are again looking to raise capital by selling shares or refinancing debt as the pre-election uncertainty that put such dealmaking into a deep freeze gives way to optimism after the selection of market-friendly candidate Jair Bolsonaro as president, five people familiar with the matter told Reuters.
One of the sources, who asked for anonymity to disclose details of private negotiations, said that up to 10 companies are in talks with investment bankers to sell shares and five other companies are planning bond transactions by January.
“Banks are advising companies to access capital markets by year-end or in the first quarter of 2019, during investors’ honeymoon with Bolsonaro’s commitment to market-friendly policies,” the source added. “It is hard to say how long it will last.”
The signs of a post-election capital markets revival underline the role that political risk and uncertainty play in investors’ decisions about corporate debt and equity in Brazil, Latin America’s largest economy.
Some of the shares offerings planned for the next months were already in the pipeline, but they had to be suspended because of pre-election volatility.
Among companies planning initial public offerings by year-end are medium-sized bank Banco BMG SA and information technology company Tivit Terceirizacao de Processos, Servicos e Tecnologia SA.
Power holding company Neoenergia SA, controlled by Spain’s Iberdrola SA, may also attempt an IPO in the first quarter, two of the unnamed sources said. Neoenergia’s offering has been suspended twice over the last two years because shareholders could not obtain the valuation they desired.
Electricity distributor Light SA (LIGT3.SA), already listed, unveiled plans for a share offering.
Last year, 34 companies raised $12.8 billion with equity offerings, according to Refinitiv data. So far this year, the amount raised has been just half that - $6.3 billion in 14 offerings.
Post-election, a wider number of Brazilian listed companies could profit from improved market conditions to raise capital.
The unnamed sources said energy companies such as Equatorial Energia SA (EQTL3.SA) and Energisa SA (ENGI11.SA), which need capital to fund acquisitions and bid in government auctions, could sell additional shares. Energisa and Equatorial did not comment on the matter.
Corporate debt could also see a revival thanks to Bolsonaro’s victory.
Issuance of Brazilian bonds, including sovereign instruments, totaled $17 billion this year in international markets, down 53 percent from the same period one year earlier.
Over the last month, as Bolsonaro became front-runner and was elected president, yields on Brazil’s sovereign five-year credit default swaps (CDS) fell 21 percent. Spread closed at 197.9 basis points on Thursday, according to Refinitiv data.
A CDS is a financial derivative that effectively functions as insurance against non-payment of bonds and other credit instruments. Brazilian sovereign spread over Treasury yields closed at 228 basis points on Thursday.
The unnamed sources say Brazil’s largest bond issuers are expected to take the opportunity to refinance debt on cheaper terms.
The first company to offer bonds after the election may be infrastructure holding Invepar SA, which is expected to sell $650 million in bonds as soon as next week. Invepar has delayed its offering from October to this month and is still in negotiations with investors, which demanded yields of up to 10 percent.
Invepar did not immediately comment on the matter.
Brazil’s state-owned oil company, Petroleo Brasileiro SA (PETR4.SA) announced on Wednesday it has refinanced $1 billion in bank loans at lower costs.
So far, Petrobras, as the company is known, has not announced any new bond issues.
Another company reducing debt cost is miner Vale SA (VALE3.SA), bankers said. Vale Chief Financial Officer Luciano Siani said in an interview the company has reached its net debt target ahead of schedule. The company is cautious about new debt because of rising benchmark interest rates in the United States.
Additional reporting by Marta Nogueira and Alexandra Alper in Rio de Janeiro; Editing by Christian Plumb and Steve Orlofsky