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CASE STUDY: Minerva Sees Aggressive Pricing on US$1bn Bond

Brazil beef giant tapped Minerva took advantage of favourable conditions in emerging markets to sell a US$1bn bond due 2026, which priced inside the company’s yield curve at 6.625%.

Jun 21, 2017 // 3:50PM

Deal At A Glance

Deal Type: Bonds

Deal Structure:  Senior Unsecured

Issuer: Minerva Luxembourg S.A.

Guarantor: Minerva S.A

Deal Size: US$1bn

Issue Date: 20 September 2016

Tenor: 10-years

Coupon: 6.50%

Price: 99.096%

Yield: 6.625%

Issuer Rating: BB-/ BB- (S&P/Fitch)

Governing Law: Grand Duchy of Luxembourg

Location: Brazil

Listing: Singapore Stock Exchange

MLAs/ Bookrunners: Bank of A Merrill Lynch, Bradesco BBI, HSBC, Itaú BBA, JP Morgan

Legal Adviser to Issuer: White & Case LLP, Stocche, Forbes, Padis, Filizzola, Clápis, Passaro, Meyer e Refinetti Advogados

Legal Adviser to Bookrunners: Davis Polk & Wardwell LLP and Pinheiro Neto Advogados

Use of Proceeds: General corporate purposes and refinancing existing liabilities

 

Background

Minerva’s aggressive expansion plan allowed it to become the third biggest beef producer in Brazil. The company sees 70% of revenues coming from international exports, unlike other Brazilian beef producers.

After entering the Middle East market with haste, Minerva sought to expand its operation in South America by acquiring corporates in Argentina and Uruguay.

The expansions of its operations, combined with the new appetite for Brazilian debt following Michel Temer’s assumption of the Presidency and a concomitant shift towards more market-friendly policies, allowed the company to successfully tap the financial markets in September 2016 with a US$1bn bond priced inside the enterprise's curve.

 

Transaction Breakdown

Taking advantage of a favourable climate for EM securities, Minerva, Brazilian meat giant returned to markets with a US$1bn 10-year bond issuance on September 2016.

A roadshow for the transaction was announced on 31 August, and the company met with 50 investors in the US, Europe, and Asia.

With the new issuance, the Brazilian giant also launched a tender offer which targeted US$688mn in notes due in 2023. This allowed the company to have full visibility with respect to the “switch” orders that were less price-sensitive than the new bidders.

The company received nearly US$3.5bn in offers on the notes, which allowed it to set the final coupon at 6.5%.

Before the tender for its existing 7.75% 2023s, those securities were being bid at 104.00, meaning that the yield of 6.625% implies a negative NIP of 30-50bp, given the yield curve – which stood at 15bp when extending from 2023 to 2026.

The transaction was popular among the US investors, with 64% of orders coming from the Americas, 28% going to EMEA investors, 5% to Asia Pacific and only 3% to Latin American accounts.

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