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Roads: Rodovias do Tietê wants to issue 18-year infrastructure bonds.
Rodovias do Tietê wants to issue 18-year infrastructure bonds
By Vinícius Pinheiro | São Paulo
After a failed attempt to conduct the first offering of infrastructure bonds, which have tax benefits for foreign and individual investors, highway concessionaire Rodovias do Tietê will return to market with an issue of at least R$1.07 billion. To convince investors, the company has remodeled its offering and reinforced guarantees. The bonds, Valor has learned, are expected to have 15 to 18 years maturity, something unprecedented on the Brazilian market.
Rodovias do Tietê is owned in equal stakes by groups Atlantia Bertin, from Brazil, and Ascendi, from Portugal. The company, which operates a road in the state of São Paulo, has decided to bet on foreign demand and will hold the offering under American rule 144A, which allows the sale of securities to a wider public in the US. It’s a similar procedure to IPOs of companies not listed on American stock exchanges.
Previous issues of tax-exempt bonds which had sales efforts abroad, conducted by road concessionaires Raposo Tavares and Ecovias, didn’t have the 144A. Because of this, they were not able, for example, to offer information material, such as the prospectus, in English, leading to investor complaints. Still, about 10% of their sales were to foreigners.
The bonds are likely to be issued in a single series, which should ensure more liquidity, another demand from international investors. The maximum interest rate is expected to be around 8% a year, plus inflation adjustment as measured by the Extended Consumer Price Index (IPCA), according to market sources.
Last year, Rodovias do Tietê tried to hold what would be the first infrastructure-bond offering. But the transaction faced a series of legal uncertainties, including whether proceeds could be used to pay down debt previous to the issue, as the company intended to do.
After the issue’s failure, BTG Pactual assumed the debt and is now the lead coordinator of the new issue. Part of the capital to be raised will be used to pay down the debt with the bank. Both the company and the lender can’t comment on the issue because of their quiet period.
Because of investors’ doubts, the government modified the law to make clear that companies may use proceeds to pay for expenses contracted up to two years before, as long as related to the project. In the case of Rodovias do Tietê, the debt rolled over in 2012 by BTG refers to commitments assumed at the time of the concession contract’s signature, in 2009. But there is an understanding that the time is counted from the last debt contracted, not the original one.