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Arcos Dorados orders US$167.3mn loan

Brazil’s largest McDonald’s franchisee Arcos Dorados has received a loan with the intention of servicing the costs of older notes. Although many Brazilian corporates hold low credit ratings as a result of both internal and external factors, small improvements in the domestic economic climate is starting to translate into gains for some.

Apr 7, 2016 // 8:21AM

The Brazilian subsidiary of Arcos Dorados has received a BRL613.9mn (US$167.3mn) 4 year loan. The proceeds will be used to pay the company’s real denominated 2016 notes maturing in July.

Amid tighter finances, many corporates are looking to issue debt to refinance older notes.

“Refinancing is common, especially when there is a lack of liquidity,” said Andres Correa, an associate at Greylock Capital Management.

He added that corporates also issue new debt to pay off existing maturities so that they do not eat into their own liquidity.

The loan is secured by credit and debit card receivables, will pay LIBOR plus 450bp, and will begin amortising in 2017.

The company secured the loan through JP Morgan, Bank of America Merrill Lynch, Itau, Santander and Citibank.

Arcos Dorados has already repurchased around BRL48.2mn of the BRL675mn of the maturing bonds.

The company’s credit rating was downgraded by Moody’s from B1 to B3 in March. Despite this, and the low ratings of many other Brazilian corporates, many performed relatively well last month according to Correa.

“People are seeing progress in the political scandal in Brazil’s government, which they see as moving forward as we edge closer to a change of government,” he noted.

Correa said the improvement in the performance of many of Brazil’s corporates can also be put down to the brief rally in commodity prices.

“A combination of local events and external factors have led to the increased capability of Brazilian corporates.”

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