BNDES recalibrates aid to big companies during pandemic
The government has scaled back its plans for federal aid to large companies through the Brazilian Development Bank (BNDES) after what it considers to have been an effective response from the banking industry and the capital market. "The fundamental issue was resolved: they had access to credit through private solutions," a source in the economic team says.
Initially, four industries received signals they would receive aid from the government: the electric, airline, automotive, and non-food retail sectors. In the first weeks of the pandemic, the steel industry was also up for consideration.
More than five months after the novel coronavirus hit the country and amid a free-fall in the GDP, only the power industry effectively received federal aid. Electricity distributors, which are the gateway for funds that feed the entire chain - up through generation and transmission - borrowed R$14.8 billion to cover losses from delinquent payments and to postpone increases in electric bills for up to five years.
Automakers and large retailers will no longer be targeted by sector-wide measures. Airlines may still be able to issue simple debentures and warrants, with Azul and Gol in more advanced talks. Latam's situation is considered more complex. The credit package, which would provide R$2 billion per company with up to 60% of funds coming from the BNDES, had an initial estimated cost of the long-term interest rate (TLP) plus 1.9% a year. Then, that changed to interbank deposit rate (CDI) plus 4% a year.
In all these industries, according to the Economy Ministry's prevailing analysis, thanks to several bond issues and rounds of fundraising by large companies, there was a reduced need for the BNDES to coordinate transactions. A member of the economic team mentioned that Via Varejo (owner of the Casas Bahia and Ponto Frio retail chains) concluded a stock offering of more than R$4 billion in June, Lojas Americanas approved the issue of debentures worth R$500 million, and Soma (parent company of fashion brands Farm and Animale) raised over R$1 billion through a successful IPO.
"At the end of the day, those who really needed financing were retailers with sales of less than R$300 million a year," the source in the economic team says, noting that this group of small and medium-sized companies was targeted by the Emergency Program of Access to Credit (Peac), backed by BNDES's Investment Guarantee Fund (FGI).
This assessment is precisely what has been guiding...
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