Loan market: Silver linings

Mar 1, 2013

Loan volumes are likely to pick up later in 2013, especially for acquisitions. But attractive rates on bonds and local currency deals continue to draw borrowers

By Karen SchwartzWhen Brazil's Cosan sought funding for its 3.4 billion real purchase of a 60.1% stake in Brazilian gas distributor Comgas last May, the loan market was the way to go. The sugar producer and energy distributor took out a 3.3 billion real, eight-year loan from Bradesco and Itaú to fund the purchase, with BTG Pactual later buying part of the deal. Now, Ba2 rated Cosan is looking to refinance the debt, as demand for Brazilian credit continues and the company's options for financing expand, says CFO Marcelo Martins. As market conditions have improved and the average cost of transactions like this one have come down, it has a number of choices. These include selling real denominated bonds locally or internationally. Loans, in part because of their pricing compared with bonds, have taken a backseat for LatAm borrowers. Companies are turning increasingly to bonds for medium-term funding. Attractive rates...

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