Brazil’s Development Bank Pushes Its Great Downsizing and Rakes in US$5.2 Billion

RIO DE JANEIRO, BRAZIL – (Bloomberg) The Brazilian state development bank (BNDES) unloaded its voting stake in oil giant Petroleo Brasileiro SA, raking in R$22 (US$5.2) billion as part of a wave of asset sales aimed at reversing years of growing government influence in Latin America’s biggest economy.

BNDES, as the bank is known, sold all 734 million common shares, including over-allotments, for R$30 apiece, according to a regulatory filing. That represented a slight discount to Wednesday’s close, January 5th, signaling demand held up well in the face of sinking crude prices. Petrobras shares surged on Thursday as much as 5 percent, to R$31.99.

“The discount was pretty small, especially when you consider the size of this offering,” said Fernando Fontoura, a fund manager who helps oversee R$310 million at Persevera Asset Management in São Paulo. “Unless oil prices continue to be a hurdle, there should be more room for the stock to rise now that the share sale’s overhang is behind us.”

The share sale is the biggest in Brazil since Petrobras’s record-breaking US$70 billion offering a decade ago. Back in 2010, it was a booming oil powerhouse with ambitions to more than double output and cement its monopoly on a massive offshore discovery. Now, it’s slimmed-down company that never came close to hitting its end-of-the-decade production target.

In all, President Jair Bolsonaro aims to raise up to R$150 billion through the sale of state assets this year, which forms a cornerstone of his program to turn more of the economy over to the private sector in a bid to jump-start stagnant growth.

Founded in 1952, BNDES was created to develop industry and infrastructure. Decades later, lending exploded under President Luiz Inacio Lula da Silva and his protégé, Dilma Rousseff. At one point, BNDES’s US$200 billion loan portfolio topped that of the World Bank’s.

Much of the financing backed companies like Petrobras and meatpacker JBS SA, which were dubbed “national champions” by local newspapers, as they embarked on ambitious acquisition sprees and global expansions. BNDES has now promised to sell off its JBS stake, which is valued at roughly R$15.8 billion.

“The government’s doing the right thing by guiding the development bank to sell stakes in companies that can tap into the market, and focusing on those that can’t,” said Adriano Pires, an oil analyst at consultancy firm CBIE in Rio de Janeiro.

The state-run Petrobras has also been slimming down in recent years. Under Chief Executive Officer Roberto Castello Branco, the oil producer has sold assets, including operations in Africa, and has exited businesses such as fertilizers. It’s part of his mission to shore up the balance sheet and focus on ultra-deep-water oil fields discovered in 2006 that sit under a thick layer of salt.

Wednesday’s transaction kicks off what Santander Brasil SA and Bank of America Corp. forecast will be a bumper year for equity offerings in the South American nation. Santander says almost half of the expected volume for 2020 will be tied to the government, including the BNDES stake sales and the planned initial public offerings of shares in subsidiaries of state-controlled bank Caixa Economica Federal.

Credit Suisse Group AG led the deal, which could help the Zurich-based bank rise in the equity-underwriter rankings in Brazil. It placed ninth on the scoreboard last year, data compiled by Bloomberg show. Bank of America, Morgan Stanley, Goldman Sachs Group Inc., XP Investimentos SA, Banco Bradesco BBI SA, Banco do Brasil SA and Citigroup Inc. also participated.

Source: Bloomberg