BNDES 'warrior' lines up jumbo Eurobond to counter Brazil government's cash grab

Paulo Rabello de Castro of BNDES is determined to protect the bank's liquidity, planning to raid the international bond markets to raise up to $5bn as the government cuts subsidies to hit fiscal targets

  • By Thierry Ogier
  • 12 Oct 2017
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Paulo Rabello de Castro
Rabello: BNDES ‘may be squeezed’
The head of Brazil’s development bank BNDES has warned the government it will resist any further demands to transfer money to shore up the national finances.
Chief executive Paulo Rabello de Castro told GlobalMarkets he would act as a “warrior” to resist such an abrupt move, which might put the bank’s liquidity “under pressure”, according to Fitch.
He also said BNDES would increasingly seek to diversify its funding abroad as the fiscal squeeze at home threatened to clip its wings.
The Brazilian treasury injected more than R$500bn (around $110bn) into the state-owned development bank during and after the great recession under previous administrations, in an attempt to shore up investment, but with limited success. Now, however, the government of Michel Temer wants its money back in order to meet its own fiscal obligations.
BNDES has already paid back R$150bn since last year and has agreed to cough up another R$17bn next month. 
But the government is asking for another R$130bn next year in order to contain the deterioration of its debt-to-GDP ratio.
Rabello, who took office in mid-year after the resignation of the liberally-minded Maria Silvia Marques, said: “They are right. We may become squeezed,” he said. “It would be a real act of treason to Brazilian interests if one attempted to cut the wings of the only institution that is dedicated to development financing in Brazil. This is not happening. If this was to happen, I will be like a warrior ready to fight this.” 

Brazil’s very own KfW

Rabello says his efforts to diversify funding abroad has already found a positive echo from institutional partners such as China Development Bank, JBIC of Japan, Agence Française de Développement, and KfW of Germany. He said he would soon seek credit rating agencies to improve BNDES’s ratings (Moody’s current baseline credit assessment stands at Ba2) before the planned Eurobond issue.

While he stressed that the bond was his personal intention rather an official project, Rabello has already tested the possibility of tapping the Eurobond market during a recent visit to London, as “the bank will increasingly have to become less dependent from subsidised funding,” he said. 
“I figure out that by next February, we can issue a bond in the international capital markets in a big way,” he said. 

  • By Thierry Ogier
  • 12 Oct 2017

All International Bonds

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • Today
1 Citi 357,043.08 1340 9.06%
2 JPMorgan 319,078.96 1445 8.09%
3 Bank of America Merrill Lynch 316,666.04 1099 8.03%
4 Goldman Sachs 236,643.87 789 6.00%
5 Barclays 230,494.28 891 5.85%

Bookrunners of All Syndicated Loans EMEA

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • Today
1 HSBC 34,591.50 163 6.58%
2 Deutsche Bank 34,293.84 117 6.53%
3 Bank of America Merrill Lynch 31,293.04 95 5.96%
4 BNP Paribas 27,578.61 168 5.25%
5 SG Corporate & Investment Banking 23,982.83 136 4.56%

Bookrunners of all EMEA ECM Issuance

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • Today
1 JPMorgan 19,745.92 80 8.86%
2 Morgan Stanley 16,323.54 83 7.32%
3 Citi 15,946.50 94 7.15%
4 UBS 15,487.17 60 6.95%
5 Goldman Sachs 14,053.61 76 6.30%