Banco Daycoval S.A. (BVSP: DAYC4.SA), a publicly traded Brazilian middle-market financial institution, raised approximately R$ 400 million through an innovative, hybrid security composed of debt with warrants attached. The investors had the opportunity to acquire Banco Daycoval equity warrants by investing in newly issued certificates of deposit (CDs) with a maturity date of March 31, 2014. The CDs yield an average of 99% of the Brazilian interbank lending rate (CDI), with a 110% rate over the first four years and a 55% yield in the final year. The investor group was led by Cartesian Capital Group, a USD 1.0 billion emerging markets-focused private equity fund, and included significant participation from the International Finance Corporation and Wolfensohn Capital Partners, a firm established by former World Bank President James D. Wolfensohn.
The transaction enables Banco Daycoval to significantly strengthen its balance sheet in the face of a weakening economy and at a moment of turbulent capital markets. In parallel, the offering provides Cartesian Capital Group and other participants with an opportunity to invest in a meaningful transaction with a well-managed publicly traded Brazilian financial institution. Fredericks Michael & Co. successfully bridged its relationships both within the Brazilian financial institutions sector and with the international financial sponsors community in advising Cartesian Capital Group on this very innovative transaction.
