Brazil agri turns a corner as M&A chances emerge
August 8, 2018 |
Distressed production mills are ripe for purchase, while the majority of the sector still shies away from local currency bonds
Brazil's agribusiness sector has seemingly turned a corner after two soft years and opportunities to snap up production mills has increased, according to Guilherme Nastari of Datagro Financial.
"We just closed two distressed mills last November, and now we have mandates for eight distressed mills and two more in operation," he told LatinFinance on Tuesday.
Buyside interest is mainly coming from local players, particularly for the distressed assets. However, Nastari said inquiries had come through from international companies, looking to diversify their portfolios.
Debt restructuring for Brazil's agribusinesses has also heightened and Nastari alone is working on a potential BRL1.1bn ($293.7m) pipeline.
The country's agri space has not taken on high amounts of local currency bond debt, or debentures. Brazil's agribusiness receivables (CRAs) market and bank loans presently make up the bulk of capital markets presence, according to Pedro Mesquita, head of coverage at brokerage house XP Investimentos.
He acknowledged that financing options beyond CRAs and bank loans were developing, but said the agribusiness sector needed to prepare internally, before tapping the traditional local currency bond market.
"There are resources to invest in agribusiness," Mesquita added. "But it is the sort of capital that requires more. I believe as some issues start coming out, it will push other agirbusiness players to invest in governance."
Meanwhile, pulp and paper producer Fibria is hoping investors will opt against redeeming the roughly BRL5bn it has in outstanding CRAs. Its tie-up with local rival Suzano has triggered covenants on its CRAs and Fibria will need to engage with investors holding the certificates.
The CRAs are spread across nine tranches and mature through September 2023.