IRB proclaims share providing to boost BRL 1.2 billion

After weeks of anticipation, the IRB announced a share offering to raise BRL 1.2 billion – funds that will help the reinsurer to ‘fit’ the minimum capital requirements and technical provisions of its regulator, SUSEP.

The initial offering is for 597 million shares. Multiplying this volume by yesterday’s closing price – BRL 2.01 – the company would raise BRL 1.2 billion, which was also set as the maximum value of the offer.

The market value of the IRB is R$ 2.55 billion. The stock closed yesterday down 5.18%.

But the operation also provides for an additional lot of up to 200%, which could lead the company to issue up to 1.791 billion new shares.

The forecast of an additional lot of these proportions – while there is a limit of R$ 1.2 billion for the operation – suggests that the IRB is prepared for a scenario in which it has to sell the new shares at a substantial discount in compared to the screen price. If it had to issue 1.791 billion shares to raise BRL 1.2 billion, the IRB would be selling the new shares at BRL 0.67/share.

The share price in the offering will be set on 1 September.

The coordinators of the offer are Bradesco BBI and Itaú BBA, linked to the two relevant shareholders of IRB, and Santander is the additional coordinator.

Bradesco Seguros has 15.8% of the capital of IRB; Itaú Seguros, 11.5%. The two shareholders intend to follow the offer in proportion to their holdings, a source with knowledge of the matter told the Brazil Journal.

The offer comes at a time when the market has upped its ante against IRB stock close to the maximum level allowed by B3. Last night, the Exchange raised the ceiling for short selling, saying it was responding to market demand.

The IRB said that if there are surplus funds after it has settled its status with SUSEP, it will be able to use the money for general corporate purposes and payments of “contingent liabilities, including those that may arise from agreements with US authorities”.

In April, the SEC filed a lawsuit against former IRB CFO Fernando Passos for fraud. The IRB appears in this process as a “related party”, but was not named in it, that is, it is not a defendant. Sources told the Brazil Journal that the reinsurer wrote about the matter in the relevant fact of the follow-on as a “precaution” in case, in the future, the American justice understands that the company has to pay something to shareholders there, but, according to the sources, the IRB does not expect this to happen.

Source: Brazil Journal