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Brazil Takes Advantage Of Latest Upgrade To Tap Market

By Rogerio Jelmayer and Claudia Assis, Of DOW JONES NEWSWIRES

SAO PAULO -(Dow Jones)- Taking advantage of a recent sovereign upgrade by Moody's, Brazil on Wednesday tapped the international bond market again in order to fill out its debt curve.

Early Wednesday, the Brazilian Treasury announced an issue of dollar- denominated global bonds coming due in January 2041. The issue will be the first for that year and will constitute the longest maturity for any Brazilian overseas bond.

Latin America's largest nation is expecting to raise at least $1 billion with the issue.

The announcement comes just over a week after Moody's Investor Service announced it had raised Brazil's sovereign credit rating to Baa3, an investment- grade rating, more than a year after Standard & Poor's and Fitch Rating did so.

More important, Brazil is using its status to provide quality for its debt management, including longer maturities and lower debt service costs.

"Soon we'll make our next debt issue," Brazilian Federal Treasury Secretary Arno Augustin said Tuesday. "It will be in dollars and will follow criteria of recent sales, in terms of quality, longer maturity and lower cost."

Augustin was as good as his word, announcing the 2041 issue within 24 hours of his comments.

Brazil last sold debt overseas in late July with a $525 million reopening of its 2037 global bonds. The bonds, which carried a coupon of 7.125%, were sold at 108.63 to yield 6.45%.

According to market participants, the current offer of 2041 global bonds, despite their longer maturity, could well came at a lower price. Price guidance on the bonds is 5.85%, a person familiar with the deal said.

"It's the first time they are issuing in the long end of the curve in a while so it is expected to do quite well," said Arif Joshi, an emerging-market fixed- income fund manager at HSBC Halbis in New York.

He noted that technicals were on Brazil's side, helping to explain the timing, as the 2041 bonds are expected to price cheaper than the July issue.

Investors demonstrated ample appetite for the issue. Demand for the new issue is going strong, at around $3.5 billion as of Wednesday morning, a source close to the operation said.

Given strong demand, some participants are expecting the Brazilian Treasury to hike the volume, possibly to $1.5 billion.

Barclays and HSBC are coordinating the 2041 global issue.

Interestingly, the government's July issue led to a spate of private issues. The same could happen this time around, market participants said.

Following the July sovereign issue, Brazilian companies and banks raised a total of $3.65 billion from overseas bonds, according to data compiled by Dow Jones Newswires.

Meanwhile, local jet maker Embraer (ERJ) and state-run bank Banco do Brasil ( BBAS3.Br) are expected to access debt markets soon to raise around $500 million each.

Embraer said last week that it plans to sell global bonds to foreign investors dated 2020 through its subsidiary Embraer Overseas Limited.

-By Rogerio Jelmayer and Claudia Assis, Dow Jones Newswires; 5511 2847-4521; rogerio.jelmayer@dowjones.com

  (END) Dow Jones Newswires
  09-30-091322ET
  Copyright (c) 2009 Dow Jones & Company, Inc.