Brazil’s development bank, BNDES, has extended a US$1 billion bond issue to continue to profit from favourable tax conditions.
The bank issued a new series of bonds on 4 June via a special purpose vehicle created in the Cayman Islands, in anticipation of its existing bond issuance of the same value maturing 12 days later.

This is the first non-government investment grade issue since Brazil's rating was upgraded. Maria Cunha Matos of Linklaters, counsel to BNDES, says there was a strong market reception to the bonds in light of this.

Interest payments on BNDES’ existing notes were exempt from withholding tax. But Brazil’s tax legislation has changed since they were issued, meaning such exemptions are not available on new notes.

“The tax treatment was all under Brazilian law,” says Matos. “The transaction involved some sophisticated mechanics, not least the coordination of the clearing systems, the stock exchange and the trustee to ensure existing bondholder rights were protected.”

With the funds from its own issuance, the SPV purchased the existing BNDES bonds on their maturity date, and amended their terms and conditions, including the extension of their maturity date to 16 June, 2018.

The SPV bonds were exchanged for the amended BNDES bonds on 17 June. They are listed on the non-regulated market in Luxembourg.

Morgan Stanley and Citibank were joint book runner and lead managers.
Counsel to BNDES
In-house counsel - Luciana Tito

Partners David Fenwick, Jon Gray, managing associate Keith Townley and associates Maria Matos, Andrew Bloom, Heidi Schmid, and Michael McCourta

Cayman Islands
Maples and Calder
Partner Kieran Walsh and associate Mark Neo

Counsel to Morgan Stanley and Citibank

Machado, Meyer, Sendacz e Opice Advogados
Partner Nei Schilling Zelmanovits and associates Clóvis Panzarini Filho, Larissa Lancha Alves de Oliveira and Bruna Marrara Martinez

Clifford Chance LLP
Partner Anthony Oldfield and associate Maya Mehta
(Latin Lawyer 01.07.2008)
(Notícia na íntegra)