Corporate debt market still buoyant despite soaring costs
Last week, retailer Americanas issued R$2 billion in bonds, an offering that drew attention for the amount, term and low cost: the securities mature in 11 years and pay Brazil’s interbank benchmark rate, known as CDI, plus 2.75%. The cost is even lower than what the company pays for bonds issued abroad (CDI + 4.6%, considering swap in reais).The issue compares with others in the same period. In the same week, the construction company Tenda agreed, in a shareholders’ meeting, to renegotiate the conditions of its debt, of about R$1 billion, with creditors. The deal included an increase in the rate of return to investors, guarantees and limits for growth targets.These two cases show the current dynamics of the corporate debt market, which is now the main source of financing for companies - according to data from the association of securities firms Anbima, 90% of capital market issues came from the local debt market. For specialists, the rise in the Selic, Brazil’s benchmark interest rate recently set at 13.25% a year, will increase costs for all companies. But since the supply of funds is still abundant, companies more exposed to the economic cycle, such as those in the construction and retail industries and smaller ones in other sectors, will have a harder time tapping the market.The interest expenses of the companies that make up the IDEX-CDI rose 62% year-over-year in the first quarter, according to a study by asset management company JGP. The IDEX-CDI is an index that measures the profitability of floating-rate bonds of 153 companies that issue securities traded in the secondary market. To make this calculation, JGP excluded Petrobras and Suzano, which distort the data because of their size. Then, it took into account an average Selic rate of 2.13% in the first quarter of last year and 10.44% in the first three months of this year. According to Alexandre Muller, a partner at JGP, this cost will be even higher, since the average Selic in the second quarter is expected to be 12.43%.Even with this higher cost, the large figures show that the market remains buoyant. According to Mr. Muller, the offerings of CDI-linked securities totaled R$39.6 billion this year through May, more than double the amount of the same period last year, of R$17.9 billion. This is possible because the continuous shift of capital flows to bonds from equity guarantees demand for new securities. This can be measured by the spread paid above the CDI in these offerings...
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