(Banco Modal) June 17, 2010 – Banco Modal, one of Brazil’s leading privately-owned banks, announced that its FIP Oil and Gas, Private Equity Fund managed by Modal and administrated by Caixa Econômica Federal, makes its first investment. The corporation benefited is ENESA Engenharia that operates in gas, energy, steel and metallurgy among others. The investment will be a minority stake in the amount of BRL 90 million, approximately 20% of the total BRL 500 million FIP captured amount.
The objective of the fund is to inject capital into companies in the oil and gas sector, promoting their structured and sustainable growth and eventually turning them into potential candidates for public listing over the next years.
The fund, which has the support of Petrobras and Prominp, is the first Private Equity Fund aimed at companies in the oil and gas supply chain, i.e. present or potential Petrobras suppliers. The fund start-up is aligned with the announcement of Petrobras’ strategy to promote and stimulate funding alternatives to its supply chain. Prominp also contributes to the fund participating in the process of identifying target companies for investment through its ongoing analysis of the oil and gas supply chain.
The placement was completed by Modal Bank in the expected amount of BRL 500 million. Among the nine Fund shareholders are Banco Nacional de Desenvolvimento Economico (BNDES), represented by BNDESPAR; (PETROS), the Petrobras pension fund; FUNCEF, the pension of Caixa Econômica and CEEE, the pension fund of Companhia Estadual de Energia Eletrica do Rio Grande do Sul. It is noteworthy that the choice of BNDES was made in a competitive process and that the investment in MODAL Private Equity Fund was the only investment in the oil and gas sector in the selection process.
The Fund will invest primarily in minority equity stakes, preferably through issuance of new shares, in other words, capital injection in the target companies. This way the fund managers will promote a total alignment with the interests of the original shareholders. Over the next four years, FIP Oil and Gas plans to invest BRL 50 million to 100 million per company.
The investments of the Fund will allow each invested company to improve its business development through: (i) acquisition of financial expertise; (ii) oil and gas industry relationships; (iii) implementation of best governance practices; and (iv) business continuity approach.
The ultimate goal of the Fund, acting as a partner, is to prepare the associated company to engage in an IPO four and five years later, in a solid and structured way. The promotion of incentives to structure other FIPs is part of Petrobras’ strategy to promote and stimulate funding alternatives for its supply chain, which today, is understood as the main challenge for the growth of its business and the oil and gas sector as a whole.
Track record in the oil and gas supply chain
Since 2001, Modal has been allocating resources trough credit operations to oil and gas sector companies. Modal has already granted more than BRL 7.4 billion in loans and has completed more than 1,000 visits. The idea is to use its expertise to identify the most capacitated companies to take advantage of investments in the sector.
The team of the Private Equity arm of Banco Modal, currently managing nearly BRL 2.0 billion, has a long history of participation in private equity and M&A ventures with a wide experience in board participation. This business has proven very successful and its development constitutes one of Banco Modal’s top priorities.
About Banco Modal
Banco Modal was founded in 1996 and has more than 400 corporate clients located in 11 Brazilian states. As of December 2009, Modal had BRL 957 million in assets, BRL 203 million in equity, a capital base of BRL 255 million and a net income of BRL 18 million.