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Strategies & Market Trends : Telebras (TBH) & Brazil -- Ignore unavailable to you. Want to Upgrade?

To: wl9839 who wrote (15335)	5/17/1999 2:34:00 PM
From: wl9839	Read Replies (1) \| Respond to of 22640

IFC, World Bank Shelve Plan to Back Brazilian Corporate Bonds Tokyo, May 17 (Bloomberg) -- The International Finance Corp. and World Bank are shelving a plan to back bonds sold by Brazilian corporations because the companies are no longer having trouble accessing international capital markets, the head of the IFC said. The decision to cast aside the plan is a further sign investor confidence is returning to Brazil's economy only months after the government sought a $41.5 billion rescue package from the International Monetary Fund, World Bank and other lenders and devalued its currency. ''Brazil is now turning around,'' Peter Woicke, executive vice president of the IFC, the World Bank's private lending unit, said in an interview. ''At least for the time being, we have put (the bond-guarantee plan) on the shelf.'' The program, initially requested by the Brazilian government, would likely have provided a partial guarantee for the corporate bonds, clearing the way for more debt sales at lower borrowing costs. This month alone, though, Banco Bradesco SA, Latin America's largest privately owned bank, sold $100 million worth of debt at 9.875 percent, Banco Itau sold $100 million in 18-month bonds yielding 10 percent, and Uniao de Bancos Brasileiros SA sold 50 million euros ($53 million) in two-year bonds with a yield of 7.89 percent. Restoring Confidence During a series of meetings last month, Shahid Javed Burki, director of the Latin America and Caribbean division at the World Bank, said the idea of backing corporate bonds was under consideration as part of a drive by the lender to restore investor confidence in emerging markets. ''We were faced, starting last September or October, with tremendous demand from Brazilian corporates who were basically in very good shape -- they were not overleveraged -- but didn't have access to dollars all of a sudden,'' Woicke said. Just 10 weeks ago, Brazil's currency tumbled on concerns that that IMF aid could be delayed. Brazil needed the funds to shore up reserves that had plunged by $50 billion since August. That's changed now, and the government could turn down the remaining loans from the IMF-led aid package as growing confidence and capital inflows make the funding unnecessary, central bank President Arminio Fraga said. Brazil has already gained access to $18 billion from the aid package, with the next installment due in June. Brazil's central bank last week lowered interest rates to about 27 percent and the currency has stabilized to 1.67 real to the dollar. Backing Government Bonds As part of the campaign to restore investor confidence, the World Bank last month created a $2 billion program to partially guarantee bonds issued by governments to help them resume borrowing on the international capital markets. Yet Brazil, Malaysia and South Korea have each recently tapped into the capital markets after being shut off from borrowing, in some cases for more than a year. Sovereign bond guarantees are a departure for the World Bank since the lender's money will be used to help finance government debt rather than go toward a specific development project, the bank's traditional role. The World Bank partially guaranteed a bond for the Electricity Generating Authority of Thailand last October. The IFC, which typically provides loans and equity investments to private companies in emerging markets that are having trouble raising resources from commercial banks, raises its funds from its own bond offerings, investments and loans. It also encourages commercial banks to contribute to its loans and investments. ------------------------------------------------------------------------ © Copyright 1999, Bloomberg L.P. All Rights Reserved.