Rossi Residencial SA (RSID3), Brazil’s most indebted homebuilder, is in talks with private-equity funds to sell a minority stake in its Rossi Urbanizadora unit, Chief Executive Officer Leonardo Diniz said.
The subsidiary, which builds gated communities, has a land portfolio valued at 6.8 billion reais ($3.4 billion) and expects to generate 1.8 billion reais in profit over the next 8 to 10 years, Diniz said today in an interview at Bloomberg’s Sao Paulo office. The shares rallied after he spoke.
The stake sale is part of a plan to reduce net debt that totaled 123 percent of shareholder equity in 2012 to as low as 85 percent by year-end, Diniz said. He didn’t identify any suitors, beyond saying that the funds were in Brazil and abroad, or elaborate on the status of the discussions. Sao Paulo-based Rossi created the unit in August as it focuses more on middle- and high-income home buyers.
“This year we expect to generate profits,” Diniz said. “Over the next few years, we have a projection that we will improve the return on equity, and net and gross margins.”
The shares rose 2.1 percent to 3.34 reais at 3:06 p.m. in Sao Paulo, after climbing as much as 3.4 percent and reversing an earlier decline. Rossi tumbled 28 percent this year through yesterday, almost three times the 9.8 percent drop in Brazil’s benchmark Bovespa index.
Rossi is carrying debts of 4.5 billion reais, of which 1.5 billion reais is due in the short term, Chief Financial Officer Rodrigo Medeiros said. The company posted a loss of 206 million reais in its last fiscal year.