Category: Funds

Rio-based hedge fund Gavea Investimentos is looking at taking a 15% stake in RBS Comunicacoes, a broadcaster and a Globo affiliate based in the southern Brazilian state of Rio Grande do Sul, say people familiar with the process. The stake is heard worth more than $200m. The company, which reportedly has ties to Gavea senior executives including founder Arminio Fraga, has apparently agreed to the transaction and will look to close by the end of September. RBS is looking to use its platform to expand digital capabilities. RBS raised BRL-denominated funds in the international bond market last year. It issued BRL300m in 10-year 11.25% notes at 99.271 to yield 10.375% via Standard Bank. The BB minus issue was for refinancing debt.

Denham Capital, the PE firm, is making an equity investment of up to $50m in CariSal, an investment holding company that includes production of caustic soda, calcium chloride and other related products. Carisal has operations in New York and Trinidad and Tobago, and the Denham investment will be used to complete a calcium chloride/ caustic soda complex at Point Lisas, Trinidad. The facility will nominally produce 100,000 mt caustic soda, 70,000 mt pure pellet and 78,000 mt pure flake calcium chloride per year and start operating by early 2010. The company has signed a 10-year agreement with Alcoa to supply caustic soda, says Denham. Denham will gain majority ownership of CariSal through its investment. The existing CariSal management team will continue to be responsible for managing the operations of the company. Denham has investments elsewhere in South America and typically targets investments in the $50m-$250m range.

LatAm equity funds suffered redemptions of $504.0m in the week ended August 13, according to EPFR Global, which calls it the week’s worst performing major fund group. LatAm posted a collective 6.26% loss, extending a 10-week, $3.45 billion losing streak that has been fueled by steady outflows from Brazil equity, says EPFR. Brazil funds lost $47.0m, which helped bring AUM to $12.3bn. So far this year, Brazil funds have seen net inflows of $257m. “With some commodity prices hitting 6-month lows and the price of oil dropping briefly below $113 a barrel, investors pulled more money out,” says the service. The asset class as tracked by EPFR has a total $27.9bn in assets under management (AUM) and has lost $1.81bn so far this year.

Brazil’s Gavea Investimentos will in its third $1.2bn PE fund continue to participate in privately arranged deals that involve taking equity stakes in public, or soon to be public companies, Arminio Fraga, the asset manager’s founder, tells LatinFinance. Aside from its usual strategy – illiquid investments in growing, privately held companies that are still a ways from being ready for an IPO – Gavea will look at privately marketed deals from more mature entities, or even outright market purchases to generate returns. “There are many more opportunities now in the private market. There are lots of [companies] trying to raise capital now,” says Fraga, referring to difficult public equity market conditions. The former central bank president notes that Gavea’s last fund made several purchases of pre-IPO notes. These include Bovespa, Magnesita, OGX – which sold $1bn in equity 6 months prior to IPO – and Aracruz.

Brazil’s pulp industry is a step closer to consolidation following VCP’s announcement Wednesday that it purchased a 28% stake in Aracruz – which is optioned by Safra – from the Lorentzen Group for $1.7bn. Credit Suisse advised Lorentzen while Estater, a Sao Paulo-based boutique, advises VCP. Added to an existing 28% stake, VCP now has 56% of the voting shares in Aracruz, a global exporter of pulp and the largest of its kind in LatAm. VCP’s bid to become one of the world’s top pulp exporters depends on Grupo Safra, which also holds a 28% stake in the company. Safra has 90 days to exercise its option to buy the Lorentzen stake from VCP, which would give it a 56% stake, or sell. Bankers on the deal speculate Safra, a financial investor in Aracruz, is not interested in controlling the asset outright. In statement filed late yesterday with the CVM, Safra says it will consider its options, including the possibility of sharing control of the combined company with VCP. JPMorgan is advising Safra. Suzano, LatAm’s second largest pulp producer and potential bidder for Aracruz, has kept mum on any potential involvement. The company, which seeks consolidation in the sector, is advised by Signatura Lazard, and could potentially make a bid for the combined company further down the road, say bankers.

Brazilian asset manager Gavea Investimentos is in the process of closing its third private equity fund, expected in the $1.2bn size area, say executives at the shop. The company’s founder Arminio Fraga told LatinFinance in February he would look to raise a new fund following a $840m vehicle raised in March 2007 and after a first, $350m PE fund closed in 2006. With the new entity, Gavea, which is privately held and counts on onshore and international investors, will have $7.5bn under management. Among the fund’s investments in the last fund were Azul, the startup low-cost airline led by ousted JetBlue CEO David Neeleman. Gavea is completing its fifth year as an asset manager, though it only launched a dedicated PE vehicle two and a half years ago.

Brazilian private equity firm GP Investments is heard to be close to announcing its fifth and largest ever private equity (PE) fund, say executives away from the company. GP has apparently told investors that its new fund will likely top $2.0bn in size, making it significantly larger than the $1.3bn GP Capital Partners IV, closed in October 2007. The Bovespa-listed PE firm is close to announcing a first close for GP Capital Partners V at roughly $1bn, say people with knowledge of the plans. A substantial portion of that money is heard coming from GP’s own coffers. GP is among the most active PE firms in Brazil and has recently opened up an office in Mexico, installing a partner there to sniff out deals. It began investing in other LatAm countries through its fourth fund, the most notable acquisition being Pride Internationals’ assets. GP’s stock has more than doubled in value since its July 2006 IPO, closing Thursday at BRL17.70. GP executives declined to comment on the new fund. Fundraising for LatAm PE dipped in the first half, but a robust year is anticipated, according to the Emerging Markets Private Equity Association (EMPEA). Funds focused on LatAm/Caribbean raised $1.289bn in the first six months, down from $1.354bn in the corresponding period of 2007. There is roughly $3.9bn still to be collected for vehicles set up in 2007 and 2008 to target LatAm, and EMPEA expects the full year to come close to the $4.4bn total raised last year. However, anecdotal evidence suggests difficultly finding enough local managers to deploy all of this newfound dedicated PE cash.

Fundraising for LatAm PE has dipped slightly, but another strong year is anticipated, according to first half data from the Emerging Markets Private Equity Association (EMPEA). Funds focused on LatAm/Caribbean raised $1.289bn in the first six months, down from $1.354bn in the corresponding period of 2007. This went against the global trend, which saw money piling into EM PE funds, mainly those dedicated to emerging Asia. But there is roughly $3.9bn still to be collected for vehicles set up in 2007 and 2008 to target LatAm, and EMPEA expects the full year to come close to the $4.4bn total raised last year. That amount was a significant mark up versus the $2.6bn raised in 2006. Fundraising continues to be buoyed by new pockets of cash from regions like the Middle East, as well as fresh funds that are taking a LatAm regional view. Anecdotal evidence suggests difficultly finding enough local managers to deploy all of this newfound PE money. The revival in LatAm PE appears to have legs. “What began as incipient interest in emerging markets private equity has developed into an acceptance of the asset class as part of mainstream allocation strategy. Economic conditions in the US and Europe appear to be having less impact on fundraising for private equity in emerging markets compared to mature private equity markets,” says EMPEA president Sarah Alexander. Some $35bn was raised for EM PE in the first half, up 67% versus 2007.

Latin America equity funds posted their seventh consecutive week of outflows in the 7-day period ended July 23, the longest downturn in over two years, says EPFR Global. Investors moved cash out of Mexico equity in the face of softer US demand for Mexican exports, reduced remittance flows from Mexicans working in the US and a recent drop in oil, says the fund tracker. LatAm equity funds meanwhile experienced drainage of $229.6m, or 0.48% of their $46.58bn assets under management (AUM). Brazil equity funds were also under pressure, losing $12.1m of their $13.85bn AUM. LatAm went against the winning flow of global EM equity funds, which took in $1.37bn in the week to end a 5 week, $6.8bn run of outflows, says EPFR.