Brazil’s BNDES Pushes Companies to Cut Dependence on State Loans

The Brazilian development bank BNDES said it will take steps to wean large companies off state-subsidized loans, such as providing incentives for the borrowers to sell bonds in local capital markets.

Ratings firms have cited loan subsidies through development banks including BNDES as a threat to the Brazilian government’s credit rating. Under the new rules, companies are encouraged to find their own financing through bond sales in order to qualify for the maximum benefits from BNDES, the president of the institution, Luciano Coutinho, told reporters Thursday in Sao Paulo.

“Long-term project financing can’t remain exclusively dependent on BNDES,” Coutinho said.

The new program is targeted at companies with credit ratings of AA or higher, said Denise Pavarina, president of Brazil’s capital markets association, Anbima.

The BNDES’s subsidized-loan interest rate for companies, known as TJLP, is 6 percent, compared with the benchmark Brazilian interest rate of 12.75 percent.

Coutinho said BNDES will also start offering companies credit lines that could be used to backstop local-bond payments for the first two years after issuance.

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