Second Tier Success

Dec 8, 2003

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, Brazil’s 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 Bradesco’s cheapest tier-two capital deal yet. 

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 picking up...

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