AIG invests $50 million in CBD venture in Brazil

U.S. insurer AIG is buying a 14.86 percent stake in a joint venture between Brazilian retailers CBD and Sendas for $50 million in a deal to cut the joint venture's debt, the firms said on Thursday.

As part of the contract signed on Nov. 30, American International Group (AIG) will have an option to exchange its shares in Sendas Distribuidora for shares in Companhia Brasileira de Distribuicao (CBD), they said in a statement.

If AIG exercises the option, it will be able to use the Sendas credit to subscribe to up to 3.0 billion preferred shares in CBD, Brazil's biggest-selling retailer, which will be issued in a future capital increase at market prices.

"We believe Sendas' debt should be reduced by 140 million reais ($52 million) from the current 700 million reais. The estimated reduction in annualized financial expenses should be 25-30 million reais," Jose Alberto Galvan, an analyst at BBVA Bancomer, said in a note.

"We also believe that the more favorable capital structure should provide additional room to improve execution and investments," he said.

CBD teamed up with Rio de Janeiro-based Sendas in December last year to form a 50-50 joint venture in a bid to strengthen its hand against foreign competitors like Wal-Mart Stores Inc. and France's Carrefour.

Shares in CBD, which is popularly known by its flagship supermarket chain Pao de Acucar, were 0.30 percent weaker at 66.99 reais in mid-afternoon trading in Brazil. The country's benchmark Bovespa stock index was down 0.28 percent at the time. ($1 = 2.711 reais).

(From Reuters, Dezembro 02, 2004)

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