Fitch: BNDES - Has the Well Run Dry?

CHICAGO--(BUSINESS WIRE)-- Despite its low cost lending position in order to spur economic growth, BNDES has had exposure to companies that have entered restricted defaults and defaults in the past and should not be considered a lender of last resort, according to a new report published by Fitch Ratings.

'The impact of BNDES lending has grown significantly in Fitch's internationally rated portfolio over the last three years,' said Phillip Wrenn, Associate Director and lead author of the report. 'Of the 62 internationally rated issuers in 2014, BNDES extended loans to 52 of these companies which totaled BRL92 billion. Total debt outstanding for these 52 companies was BRL677 billion in 2014. This compared to BNDES loans extended to 22 internationally rated companies in 2011, which totaled BRL75 billion. Total debt outstanding for these 22 companies was BRL371 billion in 2011. Companies such as Vale and Eletrobras increased their BNDES debt outstanding by 75% and 193%, respectively, whereas Petrobras and Gerdau decreased their BNDES funding by approximately 37% and 39%, respectively, over the four year period.'

BNDES reported an 18% drop in disbursements to BRL68.8 billion during the first half of 2015. The decline in BNDES lending over the period corresponds to the weakening sovereign and corporate credit fundamentals as Brazil slid into a recession.

Within the Fitch internationally rated universe, companies such as Tractebel Energia S.A., Ache Laboratorios, and Companhia de Gas de Sao Paulo all have BNDES debt as a percent of total debt above 50%. While these issuers are each rated investment grade, they will likely have access to other sources of financing due to their solid capital structures. Additional sources of funding would include other national banks, international banks, private placements, and possible International bond issuances will likely be difficult even for investment grade entities during the rest of 2015 and though 2016.

Brazil has placed six international issuances totaling USD2 billion through September 2015 compared to 36 issuances totaling USD25.9 billion during 2014. Lack of investor appetite and weak market conditions are expected to prevail through 2016, with Brazil's GDP projected to grow -1% in 2016 compared to -3% during 2015. The slowdown in the international debt market has ensued companies to borrow more in the local markets. The local debenture market increased to 44 local issuances totaling BRL20.1 billion through October 2015 compared to 57 issuances totaling BRL15.6 billion during 2014.

The full report 'BNDES - Has the Well Run Dry?' is available at 'www.fitchratings.com'.

Additional information is available at 'www.fitchratings.com'.

Banco Nacional de Desenvolvimento Economico e Social (BNDES) (Has the Well Run Dry?)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=873719

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View source version on businesswire.com: http://www.businesswire.com/news/home/20151201006027/en/

Fitch Ratings
Phillip Wrenn
Associate Director
+1-312-368-2075
Fitch Ratings, Inc.
70 West Madison
Chicago, IL 60602
or
Joe Bormann, CFA
Managing Director
+1-312-368-3349
or
Diana Barriga
Analyst
+1-312-368-2319
or
Media Relations:
Alyssa Castelli, +1 212-908-0540
[email protected]

Source: Fitch Ratings

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