Banco do Brasil Displaces HSBC as Top Underwriter: Brazil Credit

Banco do Brasil SA (BBAS3) is taking advantage of unprecedented offerings from state-run companies to claim the spot as the top global bond underwriter in Brazil.

The government-controlled lender has managed 15 percent of the record $34 billion in overseas sales this year, displacing HSBC Holdings Plc, last year’s top arranger, according to data compiled by Bloomberg. Brazil’s government and state-run companies have sold $21.6 billion of bonds abroad this year, just shy of the $22 billion issued in all of 2013.

Banco do Brasil is capitalizing on its ties to fellow state companies such as Petroleo Brasileiro SA and Caixa Economica Federal as they seek to lock in borrowing costs, said Alexandre Chaia, who teaches finance at the Insper business school in Sao Paulo. The bank has helped underwrite seven of eight sovereign and quasi-sovereign offerings this year, compared with five of eight in all of 2013, data compiled by Bloomberg show.

“The relationship helps, no doubt,” Chaia, who served as a consultant to Banco do Brasil when it restructured its debt capital markets business, said in a telephone interview. “They have a common partner, so Banco do Brasil does have a priority in the state-run companies. But they’ve also been growing a lot in investment banking.”

Biggest Sale

Average borrowing costs for Brazilian companies have dropped 0.75 percentage point this year to 6.01 percent, JPMorgan Chase & Co. index data show. That compares with an average drop of 0.61 percentage point for emerging markets.

Brasilia-based Banco do Brasil helped manage Petrobras’s $8.5 billion bond sale in March, the biggest emerging-market offering this year. The lender was also one of the managers in last month’s $1.3 billion sale from state-run savings bank Caixa.

“All the banks try to get into these transactions, and we’ve managed to do so by showing our work with the private sector,” Aguinaldo Barbieri, managing director for capital markets and infrastructure at Banco do Brasil, said by phone from Sao Paulo. “Investors began to want banks that understand the companies and that take on the risk of these companies. We’re their creditors. We incur those risks. That sort of relationship gained a lot of relevance and favored us.”

Caixa’s press office didn’t reply to an e-mail and a telephone phone call seeking comment. A Petrobras official who asked not to be named in accordance with policy declined to comment, as did Juanita Gutierrez, a spokeswoman for HSBC in New York.

Banco do Brasil also helped arrange a $1.5 billion offering from development bank BNDES in April.

‘No Preference’

While BNDES has a “good commercial and institutional relationship” with Banco do Brasil, there is “no preference” for the lender because it’s a domestic bank or state-owned, BNDES’s press office said in an e-mailed statement. The bank said it selects managers for its offerings based on experience and amount of bonds issued for Brazilian and emerging-market borrowers.

New York-based JPMorgan ranks second behind Banco do Brasil this year, managing 13 percent of Brazilian debt sales, data compiled by Bloomberg show. It finished 2013 in fourth place.

Borrowing costs for Brazilian companies have tumbled to 3.38 percentage points more than similar-maturity U.S. Treasuries this year, compared with an average of 3.82 percentage points over the last three years, JPMorgan data show.

Brazil’s real gained 1 percent today to 2.2028 per dollar as of 9:17 a.m. in New York.

Window Opens

“Despite the fact that some companies have already raised the money that they needed, they want to take advantage of a very good low-rate environment,” Roberto D’Avola, the head of Latin America debt capital markets at JPMorgan, said in a telephone interview from New York.

Banco do Brasil and JPMorgan helped arrange Brazil’s first European bond sale since 2005. The government sold 1 billion euros ($1.4 billion) of seven-year bonds to yield 2.96 percent on March 27, three days after Standard & Poor’s cut the country’s credit rating to the lowest investment-grade level.

“The fact that the sovereign managed to do this deal was a sign to companies that they could continue to issue,” Banco do Brasil’s Barbieri said. “The window of opportunity opened, and companies decided to take advantage of that. We’re very well positioned.”

To contact the reporters on this story: Julia Leite in New York at jleite3@bloomberg.net; Boris Korby in New York at bkorby1@bloomberg.net

To contact the editors responsible for this story: Brendan Walsh at bwalsh8@bloomberg.net; Michael Tsang at mtsang1@bloomberg.net Lester Pimentel, Bradley Keoun

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