Brazil privatizations aimed at medium-sized firms
Reuters, Monday, February 09, 1998 at 18:20
NEW YORK, Feb 9 (Reuters) - Brazil's ambitious
privatization program will concentrate on medium-sized rather
than large companies this year to counter the high cost of
borrowing, the BNDES said on Monday.
"The interest is there; however the cost of funding for the
acquisitions is going to be the name of the game," Jose Pio
Borges, vice president of the National Development Bank
(BNDES), told the Brazilian American Chamber of Commerce in New
York. He said debt costs to finance purchases of Brazilian
state-owned firms had risen some 200 basis points in the
aftermath of the crisis in Asian financial markets.
"One of the conclusions is that the most likely size that
investors are looking for is not very big...The objects of sale
will have to be at the medium-sized level to make it possible
to put together the funding," he said.
Borges said Brazil expects to privatize "a very aggressive"
$32.8 billion worth of state-owned firms in 1998 against $27.6
billion in 1997 and $6.5 billion in 1996 despite a drop in
global funds available due to the financial turmoil.
The state sales will be in the power sector, telecoms,
banking, ports, railroads and reinsurance.
"From the point of view of strategic buyers...I don't see
any reduction of interest," Borges said.
"They see it as a very unique opportunity. If they don't
buy these companies in the utility sectors of Brazil in these
next two years, they are going to miss the opportunity."
The BNDES official said the $3 billion Eletrosul, one of
four units to be broken up and sold off from federal power
holding Eletrobras (SAO:ELE_P.B), is an ideal size that could
attract five to six potential investors.
A bigger company, in the neighborhood of $8-10 billion, is
too big for the market to absorb as a single initial public
offer and will have to be sold off in more manageable chunks.
"We are not going to force the market with public offers if
the market is still very volatile and very sensitive," Borges
said.
The development bank expects Brazilian companies will
remain attractive, although it forecasts a dip in privatization
premiums this year due to the increased funding costs.
"There's no doubt the premiums are not going to be as high
as last year,but that's okay -- the premiums were very, very
high last year," Borges said.
Copyright 1998, Reuters News Service |
