EuroMoney – Aug 2011

Investment banking: BTG Pactual boosts its Brazilian leadership
Euromoney 7/6/19, 8:55 PM

Issues $500 billion international bond; Raises $1.6 billion for private equity fund.
BTG Pactual has reinforced its position as Brazil’s leading independent investment bank by issuing a $500 million international
bond and by raising one of the biggest private equity funds in Latin America.

On June 30, the bank’s Cayman Islands branch priced the US dollar denominated five-year bond, yielding 5%. It was heavily oversubscribed, with demand reaching $1.25 billion.

BTG Pactual had been working on the deal since last year but only offered it after the Cayman Islands office was authorized as a bank
branch on June 13. It is part of a bigger programme involving total issuance of $3 billion during the next few years, although the bank says it will not issue more than $1 billion during any one year and it does not expect to return to the market this year. It does not plan to
be a frequent issuer.

On June 28, the bank raised $1.6 billion for a private equity fund, called BTG Pactual Brazil Investment I. This is the third-largest sum
raised in Latin America, after Southern Cross’s $1.7 billion fund last October and Advent’s $1.65 billion fund in April 2010.

More than half the fund’s capital comes from investors in the US, Europe, Asia and Latin America. BTG is contributing $500 million of its own money and the bank’s partners and employees will put in another $200 million.

“There are three main reasons for the bond issue,” says Sandy Severino, the bank’s managing director of investment banking.
“First, it enables the bank to expand its offshore operations, especially in New York and London.
Secondly, it was of strategic value because it enables the bank to establish a yield curve for the first time.
Thirdly, and also strategically, it raises the bank’s profile and helps it get out into the market.”

Severino says the bank first started to get exposure to international investors at the start of December when a consortium, including the
sovereign wealth funds of the Abu Dhabi Investment Council, China Investment Corporation and the Government of Singapore Investment Corporation, acquired an 18.65% stake in the bank for $1.8 billion.

The bond issue took place after a recent roadshow in Europe, the US and Latin America. The bank was pleased to achieve a 5% yield, as the market conditions were tricky given the Greek crisis. BTG Pactual’s investment banking arm managed the sale and JPMorgan and Bradesco advised on the deal. Moody’s and Fitch gave the notes a Baa3 long-term rating and a triple-B-minus rating,

With the private equity fundraising, BTG Pactual has also signalled that it wants to be a big player in one of the fastest-growing financial sectors in Brazil. Private equity investment has taken off in the country during the past five years and many first-round investments are now considering IPOs, creating a buoyant buyout market.

The fund has already invested in two companies: oil services company Brasbunker and Brazil Pharma, a drugstore chain. Previously, the bank had made private equity investments through its merchant banking area. BTG Pactual partner Carlos Fonseca is responsible for the merchant banking area and will oversee the private equity investments.

One of the reasons for the fund was to help finance one of the biggest investment banking deals in Brazil that the bank would have been involved in until now: the proposed merger of Brazil’s Pão de Açúcar retail chain with the Brazilian operations of France’s Carrefour.

BTG Pactual had agreed to contribute €300 million to fund the transaction. However, on July 12, Pão de Açúcar decided to suspend the
deal after one of its largest shareholders, Casino Guichard- Perrachon, one of Carrefour’s biggest French rivals, said it thought it did not
offer value for money.

BNDES, Brazil’s state development bank, was also lined up to support the deal but pulled out after Casino signalled that it did not agree to the merger. Together with BTG Pactual, BNDES had agreed to provide up to €2.5 billion in financing but this was on the condition that the transaction was a friendly one.

Furthermore, in June, BTG Pactual offered to buy from minority shareholders the part of Banco PanAmericano that it does not already own. BTG agreed to acquire the beleaguered Brazilian bank earlier this year. “BTG Pactual has become so successful in Brazil because it has the longest track record as an independent investment bank,” says Victor Rodriguez, chief executive of LatAm Alternatives, a Miami-based hedge fund manager.

“Some competitors, such as BBA, Garantia, and Matrix, were acquired by big commercial banks. It is more flexible, efficient, and faster than bigger financial institutions. Increasing volume of IPOs, debt underwriting, M&A activity and continuing improvement regarding access to international capital markets have been key to the development of not only BTG Pactual but also other investment banking platforms in Brazil.”


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