Second Tier Success
Brazil’s Banco Bradesco locked in its lowest rate ever
in a subordinated debt issue. More banks are lining up to follow
Bradesco into a market hungry for Brazilian risk.
In November, Banco Bradesco, Brazils largest private
sector bank, placed the largest subordinated debt issue ever
sold by an emerging market issuer. Merrill Lynch lead-managed
the $500 million, 10-year issue that had a 8.75% coupon. The
issue, which carried political risk insurance from Sovereign
Risk Insurance, was Bradescos cheapest tier-two capital
The deal was a hit with investors. It clocked up $800
million in orders before Merrill Lynch closed the book. The
bond, launched at a spread of 449.7 basis points over US
Treasurys and priced at 99.183%, was soon trading at 102.627%.
José Guilherme Lembi de Faria, executive director at
Bradesco, says the bank is raising subordinated debt, which is
treated as tier-two capital, in preparation for an expected
surge in lending next year. The Brazilian economy is
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