Brazil’s Minerva Offers Dollar Debt as Asia’s Millionaires Grow

Minerva SA, Brazil’s third-largest beef producer, is selling U.S. dollar-denominated bonds in Asia as the number of foreign companies seeking to tap liquidity in the region grows.

Barretos, Brazil-based Minerva is marketing perpetual notes to yield about 9 percent, said a person familiar with the matter who asked not to be identified because the details are private. UniCredit SpA, Italy’s biggest lender, is meeting investors in Hong Kong today prior to a possible sale of Basel III-compliant additional Tier 1 securities, another person said. Milan-based UniCredit’s Reg S offering limits note sales to buyers based outside of the U.S. Sumitomo Mitsui Financial Group is offering 10-year Tier 2 debt, a third person said.

Borrowers are turning to Asia for their funding as the region is forecast to expand 6.22 percent this year, versus economic growth of 2.7 percent in the U.S. and 1.1 percent in the Euro area. Wealth among millionaires who call Asia home may top North America as soon as this year, according to a report by Cap Gemini SA and Royal Bank of Canada released in September.

“Any issuer has to make a decision about the Asian investor base, it can’t be ignored,” said Benedict Nielsen, Nomura Holdings Inc.’s London-based head of Europe, Middle East and Africa debt capital markets and syndicate and co-head of Asia ex-Japan syndicate. “All types of issuers need to think of Asia when it comes to financing and liquidity, and even more so when it comes to bank capital.”

Yapi ve Kredi Bankasi AS, Turkey’s fourth-biggest lender and a unit of UniCredit, said last week it’s looking to Asian investors for cash as interest rate increases at home drive up borrowing costs.

‘Growing Importance’

“We need to diversify our funding base,” the bank’s Deputy Chief Executive Officer Carlo Vivaldi said on the sidelines of a conference in Singapore. “Asia is of growing importance for our funding needs as there’s liquidity available and investors seeking return.”

Minerva is offering a rebate for private banks buying into its deal, with investments of more than $5 million receiving a discount of 50 cents for every $100 of notes purchased.

Exports accounted for about 70 percent of Minerva’s revenue in the third quarter of last year and the company expects to win an increasing share of the global market as beef output from other countries shrinks. The number of calves born in Brazil touched a record in 2012 and those animals should be ready for sale in 2015 and 2016, Fernando Queiroz, the company’s chief executive said in November.

The cost of insuring corporate and sovereign bonds in Asia-Pacific outside Japan fell today.

Credit Risk

The Markit iTraxx Asia index decreased 1 basis point to 131 basis points as of 8:40 a.m. in Singapore, Australia & New Zealand Banking Group Ltd. prices show, on track for its lowest close in a week, according to data provider CMA.

The Markit iTraxx Australia index fell 0.5 of a basis point to 103 as of 11:46 a.m. in Sydney, according to National Australia Bank Ltd. The Markit iTraxx Japan index was little changed at 88.5 basis points as of 9:40 a.m. in Tokyo, Citigroup Inc. prices show.

Credit-default swap indexes are benchmarks for insuring bonds against default and traders use them to speculate on credit quality. A drop signals improving perceptions of creditworthiness, while an increase suggests the opposite.

The swap contracts pay the buyer face value in exchange for the underlying securities if a borrower fails to meet its debt agreements.

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