Copasa plans US$174mn bond issue

Friday, March 11, 2011

Brazil's Minas Gerais state utility Copasa (Bovespa: CSMG3) will issue 288mn reais (US$174mn) in bonds to be purchased by federal unemployment insurance fund FGTS.

The 20-year bonds will have an initial grace period of 42 months and yield the interbank rate plus 9%. Copasa will pay FGTS the equivalent of 4.5% of the outstanding debt at the end of each year out of its annual revenue from service fees, paper Valor Econômico reported.

The utility has agreed to invest the money within six months, with the option of extending this period by up to three months by paying a 0.5% fee.

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Copasa will use the proceeds of the transaction to finance water and sewerage projects, the report said. FGTS has stipulated that the utility provide 32mn reais in counterpart funds.

A Copasa spokesperson declined to comment on the bond issue when contacted by BNamericas.

Of the 853 municipalities of Minas Gerais, 240 are not yet covered by Copasa. The utility plans to invest 750mn reais this year to expand its coverage.

The FGTS fund is managed by federal savings bank Caixa Econômica Federal and has a special credit line available for sanitation, transport and housing projects.