March 18, 2011 / 3:38 PM / 8 years ago

UPDATE 1-Brazil's Hypermarcas plans first global bond sale

* Hypermarcas to seek shareholder approval for plan

* Plan could help company replace expensive credit lines

* Brazil cos have raised $12 bln in debt market this year

* Hypermarcas shares up 4.6 pct (Adds background on borrowing costs, credit lines in paragraphs 4-5; updates share rise)

By Guillermo Parra-Bernal

SAO PAULO, Brazil, March 18 (Reuters) - Hypermarcas, the biggest Brazilian maker of disposable consumer goods, plans to sell debt in global bond markets for the first time, seeking to benefit from low borrowing costs and pent-up demand for emerging market corporate debt.

The Sao Paulo-based company said late on Thursday that the plan is subject to shareholder approval at a meeting on April 4. Hypermarcas (HYPE3.SA) did not disclose any terms of the debt sale.

The move comes as management, led by Chief Executive Claudio Bergamo, works on a plan to lower debt servicing costs and lock in better financing terms. Hypermarcas has sold shares and borrowed from state development bank BNDES and other bank to fund the acquisition of 19 rivals over the past three years as it expanded into pharmaceutical and beauty care products.

Some of those credit lines, apart from usually lasting no more than than five years, are costly since Brazil’s borrowing costs are, on average, the highest among the world’s major economies. By borrowing abroad, Hypermarcas could stretch out maturities to as long as 10 years and pay lower interest.

Consumer goods companies in Latin America currently pay average interest on their dollar-denominated bonds equivalent to 6.5 percent, or about 4.4 percentage points above U.S. Treasury yields, according to Credit Suisse Group data.

Hypermarcas shares jumped 4.6 percent to 19.51 reais on Friday, their biggest gain since a 5 percent rise on June 15, 2010. The shares are down about 20 percent this year but have risen in four of the last five sessions.

$12 BILLION

Record-low borrowing costs in the developed world are spurring bond sales among emerging market companies that require fresh funds to expand, renegotiate better terms for maturing debt, and buy rivals overseas. Brazilian banks and companies have raised $12 billion from global bond investors so far this year, according to Thomson Reuters data.

At the end of 2010 the company had net debt equivalent to 2.5 times operational earnings as measured by EBITDA, or earnings before interest, tax, depreciation and amortization.

In a statement, Hypermarcas said it will seek shareholder approval “for the timetable for the (debt sales), the hiring of the financial institutions and other advisers to make the transaction possible, and the characteristics of the issuance.”

According to a Morgan Stanley report on the company on Jan. 30, Hypermarcas could issue 850 million reais ($508 million) of additional debt without putting its financial soundness at risk.

Analyst Lore Serra said in that report that asset sales could provide Hypermarcas with additional leeway. Serra said the net debt to EBITDA ratio, known as the leverage ratio among analysts, was slightly above managements target range. ($1=1.68 reais) (Editing by John Wallace)

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