February 19, 2021

Milbank Kicks Off 2021 Advising on 14 Capital Markets Transactions In Brazil

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Following a strong performance for Brazilian initial public offerings (“IPOs”) in 2020, Milbank LLP has advised on some of the country’s most prominent equity and debt deals in the first weeks of 2021. This includes advising on seven of the 14 IPOs that priced by February 12, including the country’s largest IPO, at R$4.5 billion, of CSN Mineração S.A. Milbank also advised on a series of international bond deals, including four sustainability-linked bonds, which are tied to sustainability targets and environmental performance indicators for the issuers, as well as project bonds, high yield bonds and green bonds.

Thus far in 2021, Milbank advised on the following international bond deals from Brazil:

  • The initial purchasers in the US$500 million issuance of 3.200% sustainability-linked bonds due 2031 by Klabin, the largest producer, exporter and recycler of packaging paper in Brazil, and also the only Brazilian company to simultaneously sell hardwood pulp (eucalyptus), softwood pulp (pine) and fluff pulp. The terms of these sustainability-linked bonds provide for independent and cumulative interest rate step-ups if three sustainability targets related to biodiversity, water management and responsible forestry are not met in 2025.  In 2020, Milbank had also advised the initial purchasers in Klabin’s retap issuance of green bonds.
  • Simpar, a Brazilian conglomerate that controls and manages six independent businesses providing asset, logistics and mobility services with aggregated value, focusing on long term contracts, in its US$625 million issuance of 5.200% sustainability-linked bonds due 2031 and a concurrent tender offer for any and all outstanding 7.750% notes due 2024. Under the terms of the sustainability-linked bonds, interest rate step-ups are permissible if the sustainability targets related to reduced greenhouse gas emissions are not met in 2025.
  • FS Bioenergia, a low-cost, low-carbon producer of biofuels, animal nutrition products and renewable energy in Brazil, in the US$50 million reopening of its 10.00% senior secured notes due 2025, totaling a principal amount of US$600 million.
  • Movida, one of the three largest car rental and fleet management companies in Brazil in terms of fleet size and revenue, which is part of the Simpar conglomerate, in its US$500 million issuance of 5.250% sustainability-linked bonds due 2031. Under the terms of the sustainability-linked bonds, interest rate step-ups are permissible if the sustainability targets related to reduced greenhouse gas emissions are not met in 2025.
  • Simpar in its R$450 million issuance of 10.740% sustainability-linked bonds due 2028, with sustainability-linked term and targets identical to the ones of the Simpar US dollar-denominated bonds. This was the first Brazilian real-denominated international bond transaction in many years.
  • Guara Norte S.à r.l. as issuer in connection with the US$850 million offering of project bonds pursuant to Rule 144A/Reg S. SBM Offshore owns 75% of the equity in Guara Norte and the remaining 25% equity is held by Mitsubishi Corporation. This is SBM Offshore’s first issuance of a 144A/Reg S bond and as such this offering further diversifies its sourcing for project debt. 

In addition, Milbank has had a significant market share in IPOs of Brazilian companies, and advised the following market players to-date in 2021:

  • Vamos, the leading company in Brazil for the leasing of trucks, heavy machinery and equipment, which is part of the Simpar conglomerate, in its R$1.2 billion Rule 144A/Reg S IPO.
  • Mosaico, the largest digital platform for content and origination of e-commerce sales in Brazil, and the owner of the Zoom, Buscapé and Bondfaro apps and websites, in its R$1.1 billion Rule 144A/Reg S IPO.
  • The initial purchasers in the R$642 million Rule 144A/Reg S IPO of a major Brazilian sugar and ethanol producer Jalles Machado.
  • Mobly, one of Brazil’s leading home & living online retailers, in its R$811.6 million 144A/Reg S IPO. 
  • Cruzeiro do Sul, one of Brazil’s largest education companies, in its R$1.1 billion Rule 144A/Reg S IPO.
  • The initial purchasers in the R$1.1 billion Rule 144A/Reg S IPO of OceanPact, a Brazilian-based company providing environmental, subsea operations and logistics and engineering services.
  • CSN Mineração, a Brazilian integrated iron ore mining company that supplies iron to the transoceanic market and Brazil, with integrated mining, rail and port operations and a subsidiary of Companhia Siderúrgica Nacional, Brazil’s largest fully integrated steel producer, in its R$4.5 billion Rule 144A/Reg S IPO.
  • Light, one of Brazil’s largest energy distribution companies, in its R$2.8 billion 144A/Reg S follow-on offering.

Milbank is currently advising on more than a dozen equity capital markets mandates, including the R$15 billion IPO for Brazilian insurance company Caixa Seguridade S.A.

“Despite an economic crisis, recent political developments and the pandemic, we saw significant capital markets activity in Brazil last year showing that both investors and issuing companies increasingly rely on the capital markets for their short- as well as long-term funding and capital needs.  We are seeing this trend continue into 2021,” said Marcelo Mottesi, Chairman of Milbank’s Global Capital Markets group.

Tobias Stirnberg, a founding partner of Milbank’s São Paulo office and Global Capital Markets partner, said: “The São Paulo team’s experience with complex deals has allowed us to match the vibrant demand we’re seeing in the Brazilian market, which is mostly driven by the historically high levels of liquidity in the global capital markets.”

“Investors have entered 2021 with a similar fervor for IPOs in Brazil that we saw last year, and there is an intense appetite for investing in Brazil-based companies mostly based on the very low interest rate environment in Brazil and globally,” added Milbank Global Capital Markets and São Paulo partner Fabiana Sakai. “We are eager to assist both investment banks and companies through this exciting time.”