EM LATAM CREDIT: New Issue: Brazil's Raizen SA (Baa3/BBBneg/BBB)

"NEW $ DEAL: RAIZEN FUELS FINANCE BMARK; 12Y +255A, 30Y +275A" – BBG

IPTs 12Y: T+255bps Area
FV: T+230bps Area

IPTs 30Y: T+275bps Area
FV: T+255bps Area

• 10-year bonds of Brazil Fuels distributor and sugarcane processor Raizen were last quoted T+204, 18 bps wider vs this past Friday when there were reports of a possible capital raise that didn’t materialize. Raizen 2054 bonds are quoted T+237bps, 11 bps wider. The company is tendering for USD342mn of 2027 bonds. These bonds look interesting as pricing reflects recent business challenges as well as heavy bond issuance so they trade wide relative to other similarly rated bonds in the region.
• The Brazil (BRAZIL; Ba1pos/BB/BB) sovereign printed a 10 year at 6.75% yesterday, last quoted T+224 which is 20 bps wide to RAIZBZ 2035s. We estimated the extension from 10 to 12 years is worth 25 bps in credit curve. Other Brazil investment grade rated comps trade much tighter as their credit trajectories are better, have issued bonds less frequently and have a less complicated corporate structure such as Vale (VALEBZ; Baa2pos/BBB-/BBB) and Suzano (SUZANO; Baa3pos/BBB-/BBB-).
• S&P changed its rating outlook on Raizen to negative January 30th. The company generated negative free cash flow in the most recent quarter and neither Fitch nor S&P expect any improvement in net leverage until 2026. Raizen has credibility in managing their balance sheet as well as strong business positions and scale in sugarcane processing and fuel distribution. Raizen is a joint venture between Cosan (CSANBZ; Ba2neg/BB/BB) and Royal Dutch Shell (SHELL; Aa2/A+/AA-).