Trading de Credito (Bonds) - Exercicio Previo PDF

Fixed Income Research
BTG Pactual Global Research
Latin America
FixedIncome
11 April 2019
Latam Corporate Bonds Handbook

2019 Latam Corporate Bonds Handbook
Index
Thomas Tenyi, CFA

SUMMARY New York – BTG Pactual US Capital LLC
thomas.tenyi@btgpactual.com
Oil and Gas Health Care +1 646 924 2477
Petrobras 2 Rede D'Or 20
Jose Maria Silva
Ecopetrol 3 Chile - BTG Pactual
Pemex 4 Infrastructure & Industrials Josemaria.Silva@btgpactual.com
Canacol 5 Hidrovias 21 +562 2587 5938
Geopark 6 Rumo 22
Matheus Chermauth
Cemex 23 Brazil – Banco BTG Pactual S.A.
Petrochemicals Intercement 24 matheus.chermauth@btgpactual.com
Braskem 7 +55 11 3383 2338
Mexichem 8 Utilities
Beatriz Watanabe
Aegea 25 Brazil – Banco BTG Pactual S.A.
Metals & Mining Cometa / Saavi 26 beatriz.watanabe@btgpactual.com
Vale 9 +55 11 3383-3224
Gerdau 10 Telecom
CSN 11 Entel 27
Oi 28
Pulp & Paper
CMPC 12 Airlines
Klabin 13 Avianca 29
Suzano 14 Azul 30
Gol 31
Food Products LATAM 32
BRF 15
JBS 16 Financials
Marfrig 17 Credito Real 33
Consumer
Cencosud 18
InRetail 19
ANALYST CERTIFICATION AND REQUIRED DISCLOSURES BEGIN ON PAGE 34

Banco BTG Pactual S.A. does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the
objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. Any U.S. person receiving this report and wishing to effect any transaction in a security
discussed in this report should do so with BTG Pactual US Capital, LLC at 212-293-4600, 601 Lexington Avenue. 57th Floor, New York NY 10022.
Latam Corporate Bonds
Handbook
11 April 2019 page 2
Petrobras (BB- / Ba2 / BB-) Oil & Gas

Our view: Petrobras bonds remain attractive in our view, trading on average 90-120bps over the Brazil sovereign, compared to a 40-
50bps spread pick-up for Ecopetrol vs. Colombia. We believe bonds could tighten further to 80bps vs. the sovereign as Petrobras
continues on its path of production growth (~5%/Y), asset sales and deleverage, with an increased focus on E&P, operating efficiency
and better governance standards. We believe PBR could achieve its 1.5x net leverage target already in 2019, factoring in expected
FCFs and the recently announced TAG sale (US$8.6bn) and ToR settlement (US$9.1bn).
Asset sales: Since 2015, PBR sold 21 assets for a total US$21bn and last Friday it announced the sale of its 90% stake in TAG to
ENGIE for US$8.6bn. PBR has a relevant pipeline of additional asset sales, including oil fields, Braskem (36% stake worth US$3.8bn),
sale of control of BR Distribuidora (71% stake worth US$5.2bn), Liquigás (US$0.5bn), among others. Yet, the most transformational
milestone would be the privatization of its refining business, breaking PBR’s monopoly and reducing the room for political misuse in
the future (fuel price policy). At 7x EV/EBITDA, we estimate PBR could sell 50% of its refining capacity for US$22bn.
Transfer of Rights: On April 9th, the government agreed to pay US$9.1bn to PBR as part of the ToR renegotiation. Timing and
method of payment remains unclear, depending on the success of the upcoming auction for excess barrels (in October). There is
further upside from the reimbursement to be done by winners of the auction for all capex PBR has already deployed in the region.
Recent: (i) strong FY18 with US$31bn EBITDA and US$15bn FCF, driving net leverage to 2.3x and comfortable US$15bn liquidity
(vs. US$3.7bn ST debt); (ii) recent business plan featured a welcome leverage target of 1.5x by 2020 and a reiterated focus on E&P
(86% of capex in 2018); (iii) corporate governance and decision-making have improved materially over past years, with creation of
committees to monitor related party transactions, better decision making processes and actions to prevent fraud and corruption.
Risks: (i) oil & FX volatility; (ii) timely deployment of FPSOs & production growth; (iii) contingent liabilities; (iv) potential return of
political interference (fuel price policy & investment strategies); (v) ratings capped by sovereign, despite BB+ Fitch standalone rating.
Table 1: Financials (US$ mn) Table 2: Highlights

Petrobras (US$ mn) 2015 2016 2017 2018 2019E 2020E 2021E FCF & Net Debt / EBITDA (US$ bn)
Brent (US$/bbl) 54 45 55 71 65 66 64 4.3x 3.8x
Production (kboed) 2,256.5 2,263.3 2,333.8 2,198.0 2,285.6 2,399.9 2,519.9 3.5x
2.3x 1.8x
% y/y 5.9% 0.3% 3.1% -5.8% 4.0% 5.0% 5.0% 1.6x 1.5x
Net Revenues 96,558 81,511 88,821 95,511 91,824 97,735 98,802
Net Income -10,458 (4,521) (89) 7,171 12,356 13,732 13,824
4.6 12.3 13.7 14.3 6.0 3.8 4.3
EBITDA, Adjusted 7,860 18,621 24,528 29,441 34,250 36,507 36,926
% EBITDA margin 8.1% 22.8% 27.6% 30.8% 37.3% 37.4% 37.4% 2015 2016 2017 2018 2019E2020E2021E
Interest Expense, Cash (6,260) (7,318) (6,981) (5,791) (3,716) (3,347) (3,138) Debt Profile (US$ bn)
Taxes - (685) (1,829) (4,682) (6,399) (7,107) (7,154)
47.3
Working Capital (331) 765 (328) (2,020) (22) (642) (320)
CFO 25,940 26,144 27,112 26,332 24,114 25,411 26,314
Capex -21,249 -13,756 -13,262 -11,257 -18,076 -18,062 -18,058 15.0 10.3 12.0
3.7 3.9 7.0
FCF 4,691 12,388 13,850 15,075 6,038 7,349 8,256
Dividends -74 -73 -167 -803 0 -3,580 -3,949
FCF, after dividends 4,617 12,315 13,682 14,272 6,038 3,769 4,307 Cash '19 '20 '21 '22 '23 '24+
Cash 25,837 22,015 24,372 14,957 21,550 25,363 29,747 Debt Breakdown Exposure
Total Debt, adj. 126,262 118,513 109,127 84,220 84,130 83,664 83,307 Capital Markets 51% USD 74%
ST Debt 14,487 9,786 7,017 3,667 3,921 7,012 10,317 Banks 40% BRL 19%
Net Debt, adj. 100,425 96,498 84,755 69,263 62,580 58,301 53,561 Develop. Banks 4% EUR/Other 7%
Total Adj Debt / EBITDA 5.4x 4.6x 4.4x 2.9x 2.5x 2.3x 2.3x ECA 5%
Adj Net Debt / EBITDA 4.3x 3.8x 3.5x 2.3x 1.8x 1.6x 1.5x Shareholders
Interest Coverage 1.3x 2.5x 3.5x 5.1x 9.2x 10.9x 11.8x Federal Govt 29% Caixa 3%
FCF / Net Debt 4.7% 12.8% 16.3% 21.8% 9.6% 12.6% 15.4% BNDES 14% Free Float 54%
Source: BTG Pactual / Company Data Source: BTG Pactual / Company Data
Table 3: Outstanding USD-denominated Bonds (>US$1bn)

Bonds US$mn Price Durat. YTW Z-Sprd Bonds US$mn Price Durat. YTW Z-Sprd Bonds US$mn Price Durat. YTW Z-Sprd
PETBRA 5 3/8 01/27/21 966 103.2 1.7 3.48 102 PETBRA 8 3/4 05/23/26 3,000 119.5 5.3 5.40 303 PETBRA 6 7/8 01/20/40 1,124 103.0 11.0 6.60 402
PETBRA 4 3/8 05/20/23 1,646 101.2 3.7 4.06 174 PETBRA 7 3/8 01/17/27 3,728 111.4 5.9 5.54 315 PETBRA 6 3/4 01/27/41 1,199 101.9 11.3 6.58 399
PETBRA 6 1/4 03/17/24 2,219 107.7 4.2 4.48 216 PETBRA 5.999 01/27/28 5,401 102.4 6.7 5.64 323 PETBRA 7 1/4 03/17/44 1,742 105.6 11.7 6.78 419
PETBRA 5.299 01/27/25 3,005 102.4 4.9 4.82 248 PETBRA 5 3/4 02/01/29 2,650 100.4 7.3 5.69 325 PETBRA 6.9 03/19/49 2,250 100.6 12.6 6.85 425
Handbook
Ecopetrol (BBB- / Baa3 / BBB) Oil and Gas

Our view: Ecopetrol has continued to deleverage nicely, boosted by greater cost efficiency and lower capex. But oil reserves continue
to be a concern and we expect the company to start to have some upstream dividend pressure. Considering the fiscal situation of the
Colombian government and EC’s difficulty in finding projects to invest in, we expect higher dividends going forward. In 2018, we already
observed the payout ratio rising to 80% (vs. dividend policy of 40-60%) and the total contribution to the Colombian government soared
to 1.5% of GDP (vs. 0.6% of GDP observed in 2017). We believe EC bonds offer limited value, with a tight pick-up vs. the sovereign -
EC 26s (4.2% YTW & 218bps z-spread) trade 55bps over the Colombian Sov (vs. ~95bps in late 2018 prior to the correction in oil
prices). In fact, the spread tightening goes against the increased pressure on CF generation from the higher capex requirements and
increased dividend payout.
Recent: (i) good set of 4Q18 results, with EBITDA up 72% y/y. EC posted Q4 FCF generation (ex one-offs) of US$632mn and net
leverage declined to 1x; (ii) Ecopetrol proposed dividend implies a payout ratio of 78%; (iii) 2021 guidance unveiled: total production
to range between 750-770 kboed (CAGR18-21 of 0.8/1.7%) while investing US$12-15bn with ROIC above 11% (capex of US$4-
5bn/year implies an increase of 37-72% against 2018).
Strengths: i) large scale and vertically integrated operations with diversified revenues; (ii) experienced management team; (iii)
strategic importance, as Colombia's leading oil and gas producer (2/3 of the country's production, 100% of refining capacity and
distribution).
Concerns: (i) limited FCF generation prospects as we’d expect excess cash flows to be applied to capex/E&P; (ii) sustainability/growth
of production in long term vs. lower capex execution and relatively low reserve life; (iii) inherent risks to industry (oil & gas price
volatility, cost overruns/delays, environmental risks, macro environment, etc); (iv) sovereign’s ability to support the company (or
pressure to increase dividend payouts).

Ecopetrol (US$ mn) 2014 2015 2016 2017 2018 2019E 2020E FCF & Net Debt / EBITDA (US$ bn)
Brent (US$/bbl) 99 54 45 55 72 65 65 4,8 5,4
% y/y -8,0% -46,0% -15,8% 21,2% 31,1% -9,3% 0,0% 0,9x 1,1x 1,2x
2,2x 2,5x
Production (kboed) 755,4 760,7 717,9 715,1 720,4 721,6 704,2
3,9 3,3 1,5x 2,9 1,9
% y/y -4,2% 0,7% -5,6% -0,4% 0,7% 0,2% -2,4% 1,0x
Net Revenues 32.953 18.925 15.725 18.692 23.170 20.933 20.771 -1,8
EBITDA, Adjusted 12.242 6.571 5.936 7.815 10.531 9.282 9.146
% EBITDA margin 37,2% 34,7% 37,7% 41,8% 45,5% 44,3% 44,0% 2014 2015 2016 2017 2018 2019E 2020E
Interest Expense, Cash (238) (536) (783) (670) (690) (555) (558)
Taxes (2.382) (221) (1.534) (1.909) (2.506) (1.931) (1.902) Debt Profile (US$ bn)
Working Capital (333) (146) 132 423 490 366 358
CFO 7.239 660 4.041 5.957 7.169 6.874 6.438
Capex -3.298 -2.491 -699 -1.206 -1.721 -4.000 -4.500 2,7 3,1
2,1 2,0 1,5
FCF 3.941 -1.831 3.342 4.751 5.448 2.874 1.938 0,0 0,2 0,5 0,4
Dividends -6.252 -1.996 -564 -512 -1.509 -2.753 -2.312
FCF, after dividends -2.310 -3.827 2.778 4.238 3.939 121 -374 Cash '19 '20 '21 '23 '24 '25 '26 '28+
Cash 4.248 2.063 2.803 2.660 2.107 2.207 1.811
Total Debt, adj. 14.747 16.761 17.403 14.580 12.704 12.578 12.454 Debt Breakdown Exposure
ST Debt 1.480 1.440 1.375 1.723 1.501 1.486 1.471 Bonds 80% USD 86%
Net Debt, adj. 10.498 14.698 14.601 11.920 10.597 10.372 10.643 Banks 20% COP 14%
Total Adj Debt / EBITDA 1,2x 2,6x 2,9x 1,9x 1,2x 1,4x 1,4x
Adj Net Debt / EBITDA 0,9x 2,2x 2,5x 1,5x 1,0x 1,1x 1,2x Shareholders
Interest Coverage 51,4x 12,3x 7,6x 11,7x 15,3x 16,7x 16,4x Rep. of Colombia 88% Free Float 9%
FCF / Net Debt 37,5% -12,5% 22,9% 39,9% 51,4% 27,7% 18,2% Others 3%
Table 6: Outstanding USD-denominated Bonds

Outstanding Bonds Coupon (%) Maturity Out. (US$m n) Call Sub Rating (S&P / Moody's / Fitch) Price Duration YTW (%) Z-Spread OAS Spread
ECOPET '23 5,875 18-09-2023 1.800 N No BBB- / Baa3 / BBB 109,23 3,90 3,60 128 131
ECOPET '26 5,375 26-06-2026 1.500 Y No BBB- / Baa3 / BBB 107,23 5,72 4,17 180 178
ECOPET '43 7,375 18-09-2043 850 N No BBB- / Baa3 / BBB 120,58 12,33 5,79 319 309
Handbook
Pemex (BBB+ {Neg} / Baa3 / BBB- {Neg}) Oil and Gas

Our view: Pemex faces a material risk of downgrade and loss of its IG rating, as a result of continued negative FCF generation with
underinvestment (failure to stabilize production and reserves decline) and large transfers to the government (government fails to
support Pemex). A sovereign downgrade would likely tip the scales, as would measures in the wrong direction (such as higher
downstream capex or domestic price controls). Measures to stabilize Pemex’s B/S and ratings would require drastic support measures
by the government. Short of the government formally guaranteeing Pemex’s debt or undertaking a massive recapitalization, the best
path to avoid a rating decline seems a reduction of the level of transfers from Pemex to the government, thus allowing Pemex to boost
investments and stabilize production. The recent track record seems unfavorable and measures announced so far seem to fall short
of the company’s real needs. So far, the new administration seems unwilling to undertake the strong measures Pemex really needs.
Pemes 27s currently trade 230bps wide to the sovereign, ~100bps above the time of the issuance 1 year ago. We see room for further
widening, considering the selloff pressure the bonds would face in case of IG loss.
Recent: (i) S&P attributed a negative outlook to the sovereign and consequently to PEMEX, highlighting lower growth prospects and
higher contingent liabilities, while pointing that the new strategy for the energy sector places an added burden on the highly indebted
company; (ii) Fitch downgraded PEMEX to BBB- with negative outlook, reflecting the deterioration of Pemex’s standalone credit profile
to CCC (from B-) and a lower assessment of the government’s incentive to support the company to ‘strong’ from ‘very strong’, resulting
in a rating two notches below the sovereign; (iii) recently announced support measures include a US$1.3bn (MXN25bn) capital
increase, which pales in comparison with the 2019 budget of US$27bn (MXN520bn) in oil revenues (10% of total). Adjustments to the
tax regime seem insufficient to fix Pemex’s capital structure (the company estimates the government take would decline by MXN 11bn
in 2019). The flagship Dos Bocas refinery project (estimated at MXN50bn) would offset most of those benefits.
Strengths: (i) large scale and reserves; (ii) strategic importance to the country, as Mexico’s leading oil and gas producer.
Concerns (i) persistent negative FCF; (ii) excessive distribution to the government (tax burden ~90% of EBITDA); (iii) very high post
tax leverage metrics; (iv) declining production over the past years (down 28% since 2013; -15% throughout 2018); (iv) under-
investment in the upstream business; (v) potential loss of the IG rating as Pemex’s requires very relevant government support to
stabilize its balance sheet (massive capitalizations or drastic tax cuts, allowing it to boost investments and stabilize production).

Pemex (US$ mn) 2014 2015 2016 2017 2018 FCF (US$bn) & Debt / 1P Reserves (USD$/boe)
Total Production (Mboed) 3.538 3.321 3.037 2.700 2.642 15,3
% y/y -3,1% -6,1% -8,6% -11,1% -2,2% 12,0
Crude Oil Production (Mbd) 2.429 2.267 2.154 1.948 1.813 10,0
% y/y -3,7% -6,7% -5,0% -9,5% -6,9% 6,7 -6
5,8
Net Revenues 107.878 67.786 52.241 71.001 85.345 -12
-13
EBITDA, Adjusted 53.196 28.777 12.071 21.191 25.011
% EBITDA margin 49,3% 42,5% 23,1% 29,8% 29,3% -19
-21
Interest Expense, Cash 3.503 3.939 4.784 5.945 6.134 2014 2015 2016 2017 2018
Taxes 50.695 22.854 17.177 19.602 22.922
As % of EBITDA 95,3% 79,4% 142,3% 92,5% 91,6% Debt Profile (US$ bn)
Working Capital (4.055) (7.053) 5.307 2.289 (3.440)
11
CFO (5.058) (5.068) (4.583) (2.068) (7.485) 8
7 7 7
Capex 15.671 13.791 8.503 4.383 4.743 5 6 6 6
FCF -20.729 -18.858 -13.086 -6.451 -12.228 4 4 3
Cash 8.017 6.322 7.914 4.931 4.162 24
Total Debt, adj. 77.677 86.792 95.972 102.991 105.792
ST Debt 9.911 11.188 8.525 7.944 9.744
Net Debt, adj. 69.660 80.470 88.059 98.060 101.630
Debt Breakdown Exposure
Total Adj Debt / EBITDA 1,5x 3,0x 8,0x 4,9x 4,2x Bonds 88% USD 67%
Adj Net Debt / EBITDA 1,3x 2,8x 7,3x 4,6x 4,1x Bank Loans 6% EUR 18%
Interest Coverage 15,2x 7,3x 2,5x 3,6x 4,1x Revolver 7% MXN 12%
Cash / ST Debt 0,8x 0,6x 0,9x 0,6x 0,4x
Other 2% Others 3%
Total Debt / 1P Reserves (USD$/boe) 5,8 6,7 10,0 12,0 15,3
Handbook
Canacol (B1 / BB-) Oil and Gas

Our view: We believe that Canacol is still widely perceived as a junior oil E&P company when effectively it became a quasi take-or-
pay gas utility over the past 5 years. After the acquisition and successful exploration of OGX gas fields in Colombia, the company
joined forces with Promigas to develop pipelines to connect customers, achieving 90% contracting (for 7Y) of its 130Mcfpd capacity.
Capacity will increase by another 100Mcfpd once a new pipeline starts up (Jun-Sep 2019), which is expected to drive EBITDA up by
80%, placing Canacol in a position to generate positive FCFs and deleverage (with net leverage moving below 1x by 2020 from 2.3x
currently). Trading almost 100bps wide to GeoPark, we see good value in Canacol 25s (7.2% YTW) given its rather stable business.
We believe Canacol could receive rating upgrades over the next 2 years as production closes in on 40koebd, which today is constrained
by its scale and low diversification.
Recent: (i) Canacol reported a soft Q4, with revenues climbing 25% y/y, EBITDAX edging up 8% y/y and EBITDA margin reaching
61.6% (down 9.5pp y/y), limited by 19% y/y growth in production. (ii) Canacol announced it is planning to further extend its production
by 2021 up to 300Mcfpd, which would imply a CAGR18-21 of 35% (expected capex for the new expansion to Medellin/Cartagena of
US$300-350mn).
Strengths: (i) 90% of its capacity contracted; (ii) EBITDA expansion is a given once the new pipeline comes online (we expect CNE’s
production to soar 81% and reach 38 kboed (220Mcfpd); further expansions expected in 2021 with the Cartagena/Medellin pipeline;
(iii) dollarized prices with pass through mechanisms on variable costs; (iv) exploration success rate of 80%, with further upside to the
reserves;
Concerns: (i) execution risk & delays in delivery of the pipelines; (ii) higher than expected capex associated with pipelines; (iii) small
scale;

Canacol (US$ mn) 2015 2016 2017 2018 2019E 2020E 2021E FCF & Net Debt / EBITDA (US$ mn)
Brent (US$/bbl) 54 45 55 72 65 65 65
13,7x
% y/y -51,0% -15,8% 21,3% 31,5% -9,7% 0,0% 0,0% 16 57 80
Henry Hub MMBTU 2,6 2,6 3,0 3,2 3,1 3,1 3,1
% y/y -37,0% -2,9% 18,4% 5,0% -1,6% 0,0% 0,0% -5 -72 -24
Net Production (Kboed) 3,7 11,9 13,8 20,8 30,3 40,1 40,1 1,5x 0,9x 0,6x
Net Revenues 94 152 162 215 282 369 375
EBITDA, Adjusted 14 76 68 134 203 274 289 -141 2,7x 4,1x 2,3x
% EBITDA margin 15,4% 50,0% 41,8% 62,6% 71,9% 74,4% 77,2%
Taxes (21) 34 (32) (21) (36) (55) (60) Debt Profile (US$ mn)
Working Capital 25 (5) 13 (17) (20) (28) (12) 320
CFO (2) 88 27 75 123 167 195
Capex -140 -93 -98 -99 -106 -110 -115
FCF -141 -5 -72 -24 16 57 80
69
Total Assets 668 804 696 779 871 971 995 7
Cash 51 76 55 69 90 118 120
Total Debt, adj. 248 283 330 373 386 365 304 Cash '19 '20 '21 '22 '23 '24
ST Debt 0 26 7 7 10 14 24
Net Debt, adj. 197 207 275 304 296 247 183 Debt Breakdown Exposure
Equity 303 376 239 274 347 465 598 Bonds 98% USD 100%
Other 2%
Interest Coverage 0,7x 4,4x 3,2x 6,4x 8,4x 11,3x 13,1x Cavengas Hold. 18% Others 80%
FCF / Net Debt -71,8% -2,5% -26,1% -7,8% 5,5% 23,1% 43,8% Lord, Abbett & Co. 2%

Outstanding Bonds Coupon (%) Maturity Out. (US$mn) Call Sub Rating (S&P / Moody's / Fitch) Price Duration YTW (%) Z-Spread OAS Spread
CNECN '25 7,25 03-05-2025 320 Y No - / B1 / BB- 100,32 4,04 7,17 485 477
Handbook
Geopark (B+ / B+) Oil and Gas

Our view: Our positive view on Geopark is based on the company’s execution track record, even under low oil prices. We believe,
GPRK can continue to grow in a sustainable and profitable way, leveraging on both its existing portfolio and M&A (bidding for available
assets in Colombia, Ecuador, Mexico and Brasil), while maintaining a focus on financial discipline and value accretion. GeoPark bonds
tightened considerably since late 2018, when bonds peaked at 8.2% YTM & 570bps z-spread (trading wide do GT). GeoPark 2024s
trade at 6.24% YTW & 392bps z-spread, 77bps and 173bps inside Gran Tierra 25’ and Frontera 23’s, and 20bps over Latam Airlines.
At this point, we believe the notes are fairly priced, still offering a good carry with possible upside if oil prices continue to rise.
Recent: (i) strong Q4 results, with revenues up 42% y/y to US$151.2mn (US$601.2mn for FY, +82% y/y) and EBITDA up 55% y/y to
US$85.7mn (US$330.6mn for FY18, up 88% y/y), as production continues to ramp up reaching 38.7kbpd (up 4% q/q and 26% y/y).
Despite positive US$49mn FCF in FY18, net debt rose slightly to US$319mn, due to the acquisition of the LGI interests in Colombia
and Chile for US$81mn. Nonetheless, net leverage remained health below 1x; (ii) GPK won a bid for two new blocks in Ecuador in a
50/50 consortium with Frontera Energia (Geopark mandatory committed capex of US$30mn over 4 years); (iii) GPK is waiting for the
regulatory approval to move forward with the drilling in the Morona block in Peru (Capex requirements are US$120-130mn). Expected
first oil could be delayed to 2H20 (from 1Q20) if not approved by April (missing dry season for the works).
Strengths: (i) solid balance sheet and prudent capital structure management (currently below 1x net leverage); (ii) cost control and
financial discipline track record, even as it seeks out expansion opportunities; (iii) rising production and increased regional
diversification opportunities, (iv) one of the lower cost producers in Latam with all-in cash cost below US$40/b; (v) proven resilience,
having successfully navigated a scenario of lower oil prices, maintaining a flexible cost and capex structure.
Concerns: (i) small scale; (ii) inherent industry and exploration risks, very exposed to volatility in oil prices; (iii) credit metrics could be
pressured by more aggressive expansion, arising from expenditures related to new ventures (especially Peru Morona block), bidding
in upcoming auctions (Ecuador, Colombia, Petrobras assets, Mexico, etc) or acquisitions of partner’s stakes in current operations.

Geopark (US$ mn) 2015 2016 2017 2018 2019E 2020E 2021E FCF & Net Debt / EBITDA (US$ mn)
Brent (US$/bbl) 54 45 55 72 65 65 65
4,0x 3,6x
% y/y -45,9% -16,4% 21,6% 30,7% -9,2% 0,0% 0,0%
Production (kboed) 20,4 22,3 27,6 36,0 41,6 51,4 65,9 1,7x
% y/y 5,5% 9,6% 23,5% 30,6% 15,5% 23,5% 28,2% 1,0x 0,9x 122 312
Net Revenues 210 193 330 601 628 778 1.001 17
49 26
EBITDA, Adjusted 74 78 176 331 334 407 562 0,5x
-9 -5 -0,2x
% EBITDA margin 35,2% 40,7% 53,2% 55,0% 53,2% 52,3% 56,2%
Interest Expense, Cash (36) (34) (51) (36) (38) (36) (24) 2015 2016 2017 2018 2019E2020E2021E
Taxes 17 (12) (43) (106) (76) (96) (151) Debt Profile (US$ mn)
Working Capital (15) 2 41 35 10 28 41 425,0
CFO 40 34 122 223 246 322 452
Capex -49 -39 -106 -174 -220 -200 -140 127,7
FCF -9 -5 17 49 26 122 312 18,0 - - - -
Dividends 2 -6 0 -8 -10 -14 -18
FCF, after dividends -7 -11 16 41 16 108 295 Cash '19 '20 '21 '22 '23 '24
Cash 83 74 135 128 143 251 546
Total Debt, adj. 379 359 426 447 447 447 447 Debt Breakdown Exposure
ST Debt 35 39 8 18 0 0 0 Bonds 96% USD 100%
Net Debt, adj. 296 285 291 319 304 196 -99 Banks 4%
Total Adj Debt / EBITDA 5,1x 4,6x 2,4x 1,4x 1,3x 1,1x 0,8x Shareholders
Adj Net Debt / EBITDA 4,0x 3,6x 1,7x 1,0x 0,9x 0,5x -0,2x G. O'Shaughnessy 12% Others 0%
Interest Coverage -3,6x 1,4x 3,0x 9,6x 9,1x 11,7x 24,9x Energy Holdings 11% Free Float 30%
FCF / Net Debt -3,1% -1,7% 5,7% 15,4% 8,6% 62,1% -316,5% Manchester Group 8%

GEOPAR '24 6,5 21-09-2024 425 Y No B+ / - / B+ 100,97 3,79 6,24 392 385
Handbook
Braskem (BBB- / Ba1 / BBB-) Petrochemicals

Our view: Braskem poses an interesting case as we see bonds offering i) potential upside in case a deal between Odebrecht and
Lyondell is achieved as spreads converge closer to the LB curve (relative spread has recently widened to 84bps), or ii) a decent carry
otherwise (limited downside), trading at 30bps to the sovereign and in line with other IG peers. Negotiations between ODB and LB are
still ongoing, but we expect a deal to be announced this year, with Petrobras likely tagging along and signing a LT naphtha supply
agreement (key for the deal). On a standalone basis, we expect Braskem to continue to report conservative financial metrics, despite
lower petrochemical spreads dampening FCF generation.
Recent: (i) Q4: while domestic demand improved, FY results were impacted by the truckers’ strike in Brazil and electricity blackout in
the Northeast, impacting utilization rates; elsewhere, operations were also affected by a severe winter in the north, maintenance
shutdowns and lower ethane supply in Mexico; strong petrochemical spreads ensured record FCF generation in 2018 of R$7.1bn;
nonetheless, tighter petrochemical spreads in 4Q18 drove a relevant 47% q/q EBITDA contraction to R$1.9bn; (ii) 2019 capex guidance
at R$3.3bn (up 20% y/y) & new PP plant construction in the US 48% completed; (iii) R$2.67bn dividend proposed (100% of net
income); (iv) discussions between Odebrecht and LB on potential sale of Braskem began in June/2018.
Strengths: (i) solid track record of financial stewardship, with strong FCF generation, conservative leverage through the cycle, high
liquidity and long-term debt profile; (ii) leading position in petrochemical sector in Latam, strong market share in Brazil (65-70%), and
good pricing power; (iii) geographic & raw material diversification - 40% of EBTIDA from US, Europe and Mexico, while reliance on
naphtha as a feedstock declined to 37% (from 48% years ago); (iv) leniency agreement signed in Dec/2016 with Brazil, US &
Switzerland, establishing R$3.1bn (US$957mn) payable in up to 6 years – R$1.9bn has been paid down so far.
Concerns: (i) high dependence on PBR for feedstock supply; (ii) potential changes in feedstock agreement with Pemex, as a result of
new administration in Mexico – Pemex has been unable to deliver agreed-upon ethane volumes; (iii) highly cyclical industry exposed
to volatile FX, feedstock and petrochemicals; (iv) lower petrochemical spreads as new capacity is coming online; (v) risk of more
aggressive dividend payouts or expansion; (vi) covenant breach at BI project caused debt to be reclassified as ST; (vii) delayed 20-F.
Table 15: Financials (R$ mn) Table 16: Highlights

Braskem (R$ mn) 2015 2016 2017 2018 2019E 2020E 2021E FCF & Net Debt / EBITDA (R$ bn)
PE - Nafta Spread ($/t) 729 736 662 674 540 520 520
3.4x 2.6x 2.6x 2.5x
Polyethylene ($/t) 1,212 1,128 1,158 1,290 1,100 1,100 1,100 2.3x 2.3x 2.0x
Olefyns (k tons) 7,105 7,786 8,488 7,820 8,359 8,698 9,022
Net Revenues 47,283 47,664 49,261 58,000 57,317 59,128 61,241 3.2
3.0
4.3 2.6
EBITDA, Adjusted 9,390 11,508 12,334 11,315 10,482 10,072 10,298
% EBITDA margin 19.9% 24.1% 25.0% 19.5% 18.3% 17.0% 16.8% 0.4 0.5
1.4
Interest Expense, Cash (1,086) (1,827) (2,154) (1,917) (2,214) (1,998) (1,789)
Taxes (232) (1,153) (921) (938) (1,160) (1,044) (1,143) 2015 2016 2017 2018 2019E 2020E 2021E
Leninecy Agreement - - (1,344) (330) (361) (375) (390) Debt Profile (R$ bn) - Including Standby Facility
Working Capital (527) (3,250) (4,106) 150 277 (51) (66)
11.8 14.3
CFO 7,545 5,278 3,809 8,280 7,024 6,604 6,911
Capex (4,077) (2,875) (2,293) (2,530) (2,951) (2,461) (2,243) 5.1
3.6 4.7
FCF 3,467 2,403 1,516 5,750 4,073 4,143 4,668 2.8 3.2
1.7
Dividends (483) (1,998) (999) (1,500) (2,700) (1,500) (1,500)
FCF, after dividends 2,984 405 517 4,250 1,373 2,643 3,168
Cash* '19 '20 '21 '22 '23 '24 '25+
Cash 7,504 7,892 6,088 7,916 8,186 9,462 10,682
Total Debt 39,616 37,483 34,995 37,303 34,367 33,067 31,120
ST Debt 2,271 3,540 10,904 11,270 2,765 5,095 3,225 Bonds 60% BRL 1%
Net Debt 32,112 29,591 28,907 29,387 26,181 23,605 20,437 Project Finance 28% USD 99%
Net Debt, ex Proj. Fin. 21,020 19,354 18,524 19,837 16,920 15,067 13,061 Banks & WK 8%
Other 4%
Net Debt / EBITDA 3.4x 2.6x 2.3x 2.6x 2.5x 2.3x 2.0x
Net Debt / EBITDA, ex Mexico 2.2x 1.7x 1.6x 1.9x 1.7x 1.6x 1.3x Shareholders
Interest Coverage 3.7x 1.4x 3.1x 2.4x 5.5x 4.9x 5.6x Odebrecht 38.3% Other 25.6%
FCF / Net Debt 12.5% 1.3% 1.7% 14.7% 4.7% 10.1% 13.4% Petrobras 36.1%

Security Out. (US$mn) Price Duration YTW (%) Z-Spread OAS Spread Security Out. (US$mn) Price Duration YTW (%) Z-Spread OAS Spread
BRASKM 7 05/07/20 400 103,83 1,00 3,29 73 94 BRASKM 6.45 02/03/24 750 109,06 4,10 4,34 201 205
BRASKM 5 3/4 04/15/21 1.000 103,92 1,88 3,70 127 137 BRASKM 4 1/2 01/10/28 1.250 97,59 7,04 4,84 243 241
BRASKM 5 3/8 05/02/22 500 104,06 2,74 3,95 160 166 BRASKM 7 1/8 07/22/41 750 116,00 11,60 5,82 322 315
BRASKM 3 1/2 01/10/23 500 98,38 3,43 3,97 164 168 BRASKM 7 3/8 PERP 500 101,81 0,01 -205,47 na na
Handbook
Mexichem (BBB- / Baa3 / BBB) Oil and Gas

Our view: Despite the operational weakness and flattish EBITDA growth, we believe that Mexichem is a quality name within Mexico,
with low exposure to the domestic environment. 2019 results should be limited by shortage of ethane and excess caustic soda supply,
a scenario that shouldn’t change over the next 8-10 months. In the near term, we expect the integration of acquisitions to play smoothly,
increasing the share of specialties and revenues generated outside Mexico. We see limited upside for the bonds at current levels
(trading 105bps inside Cemex, 30bps inside Liverpool and 10bps over the sovereign). A Mexico-sentiment driven sell-off (like the one
seen during Oct-Nov last year) would be a good buy opportunity, given Mexichem’s low exposure to the country.
Recent: (i) 4Q18 EBITDA flat y/y at US$269mn, while revenues were up 15% y/y to US$1.68bn. Vinyil division: revenues up 3% y/y
to US$552mn and EBITDA down 38% y/y to US$93mn, with margins down 7.8p.p. y/y to 16.8% as PVC production costs continue to
affect division until new ethane distribution capacity starts operating. Fluent division: revenues up 29% y/y to US$985mn, driven by
the consolidation of Netafim and higher sales in AMEA/US/Canada, while EBITDA up 37% y/y to US$104mn (margin +60bps to 10.5%).
Fluor: revenues +4% y/y to US$193mn with EBITDA +16% y/y to US$79mn. Net leverage rose slightly to 2.05x (vs. 1.91x as of Q3).
Strengths: (i) low exposure to Mexico and exposure to US (more than 80% of EBITDA outside Mexico and ~25% of production in the
US); (ii) strong business position in PVC pipes throughout Latin America and Europe and on Fluorine, globally; (iii) ability to maintain
leverage on controlled levels despite increased capex and relevant M&A; (iv) increasing share of specialty products (60% of EBITDA
in 4Q18, up from 49% at 4Q17, and increasing); (v) high profitability, strong cash flow generation and low leverage; (vi) conservative
controlling shareholder who brings outside executives onboard to manage the global business
Concerns: (i) shortage of ethane and excess caustic soda supply; (ii) ongoing acquisition strategy (4 acquisitions over the past 4
years); (iii) new state tax on mining operations (marginal impacts); (iv) potential fluctuations in price of key raw materials (mostly
ethane) and dependence on PEMEX supply (Nafta manly, only affecting production in Mexico); (v) lack of short-term growth triggers.

Mexichem (US$ mn) 2015 2016 2017 2018 2019E 2020E 2021E FCF & Net Debt / EBITDA (US$ mn)
Net Revenues 5.612 5.350 5.828 7.198 6.998 7.149 7.302 1,8x 1,8x 2,1x 2,0x 1,7x
1,3x 1,6x
EBITDA, Adjusted 910 926 1.106 1.397 1.386 1.489 1.517
% EBITDA margin 16,2% 17,3% 19,0% 19,4% 19,8% 20,8% 20,8%
Interest Expense, Cash (212) (192) (195) (283) (252) (252) (252) 640 613 559 611
393 485
Taxes (88) (122) (178) (195) (243) (286) (303) 18
Working Capital 436 (127) - - 37 (69) (23)
CFO 1.046 484 733 919 928 881 940
Capex (653) (466) (248) (279) (315) (322) (329)
FCF 393 18 485 640 613 559 611 Debt Profile (US$ mn)
Dividends -65 -54 -106 -197 -420 -420 -420 908
700 750
FCF, after dividends 328 -36 380 443 193 139 191 500 500
400
Total Assets 8.670 8.806 9.759 10.061 10.008 10.391 10.562
Cash 653 714 1.900 700 893 1.034 1.229 83
Total Debt, adj. 2.335 2.369 3.310 3.602 3.602 3.602 3.602
ST Debt 44 58 60 412 412 412 412 Cash '19 '22 '27 '42 '44 '48
Net Debt, adj. 1.682 1.655 1.410 2.903 2.710 2.569 2.373 Debt Breakdown Exposure
Bonds 100% USD 95%
Total Adj Debt / EBITDA 2,6x 2,6x 3,0x 2,6x 2,6x 2,4x 2,4x MXN 5%
Interest Coverage 4,3x 4,8x 5,7x 4,9x 5,5x 5,9x 6,0x Del Valle Perochena Family 53%
FCF / Net Debt 23,3% 1,1% 34,4% 22,1% 22,6% 21,8% 25,7% Free Float 47%

MXCHF 8 3/4 11/06/19 82,88 103,08 0,53 3,14 51,92 72 MXCHF 6 3/4 09/19/42 400,00 109,89 12,18 5,96 336,03 327
MXCHF 4 7/8 09/19/22 750,00 104,28 3,14 3,54 119,99 125 MXCHF 5 7/8 09/17/44 750,00 100,18 13,07 5,86 325,16 313
MXCHF 4 10/04/27 500,00 98,24 7,09 4,25 184,21 182 MXCHF 5 1/2 01/15/48 500,00 95,66 13,85 5,81 319,53 302
Handbook
Vale (BBB- {Neg} / Ba1 {Neg} / BBB- {Neg}) Metals & Mining
Our view: Vale 26s (4.7% YTW, 229bps z-spread) have recovered now trading tight to BB+ rated peers (30bps inside Ultrapar), 15-
20bps over Brazilian IG names and 40bps over the sovereign. While impacts from potential fines still look very uncertain, at this point
we expect Vale would be able to retain IG-compliant credit metrics, especially as the company suspended dividends and higher iron
ore prices help offset part/all of the lower expected production. Nonetheless, Moody’s downgrade to junk, which some may consider
premature, has heightened concerns of a similar move by S&P and Fitch. At this level, Vale bonds offer a fair carry and we continue
to see the bonds as a good buy on the dip opportunity.
Brumadinho: So far, the regrettable tailing dams catastrophe has led Vale’s production to be disrupted by ~ 90Mtpa): Brucutu
(30Mtpa), 40Mt capacity shutdown in its southern system, 12.8Mtpa at the Timbopeba mine (following operational setbacks with MG
authorities in March), and 10Mtpa at the Alegria mine (temporary and preventive stoppage by the company). More recently, a MG
court authorized the resumption of the Laranjeiras dam, which would allow the restart of Brucutu mine but shortly after decided for the
stoppage of Barragem Sul tailings dam, which is also fundamental for the mine operation.
Recent: (i) strong Q4, with US$4.5bn EBITDA & US$1.8bn FCF, driving leverage down to 0.5x and reported net debt to sub-US$10bn
levels; (ii) IO prices rallied to US$85/t and with the seaborne market entering a period of more sustained deficits there’s room for it to
rally further. (iii) Feb/2019: Moody’s downgraded Vale to Ba1 (negative outlook), on the back of the increased uncertainties the disaster
may have on the company’s credit profile.
Strengths: (i) very low cost structure (4Q C1 cash costs out at US$12.8/t); (ii) strong financial discipline, with net debt declining to
US$14bn, strong liquidity & long-term debt profile; (iii) very high iron ore prices (driven by the supply shortages from Vale itself) is
partly/fully offsetting the volume disruption; (iv) strong FCFs and dividend cuts allow the company room to absorb potential liabilities.
Concerns: (i) risk of further supply cuts and regulatory/legal restrictions; (ii) reputational damage and fines impacting the credit ratings
and leading to exclusion of ESG mandates; (iii) slow transition to dry iron ore processing (target of reaching 70% by 2023); (iv) potential
cash outflows related to Samarco, with visibility even lower after recent events.
Vale (US$ mn) 2015 2016 2017 2018 2019E 2020E 2021E FCF & Net Debt / EBITDA (US$ bn)
IO Volumes (mt) 335 341 343 365 321 344 368 9.3
% y/y 7% 2% 1% 6% -12% 7% 7% 4.1x 6.1 5.5
C&F China 62% content (US$/dmt) 56 58 71 69 80 75 65 2.5x 3.4
Net Revenues 25,609 29,363 33,967 36,575 36,983 37,756 36,366 1.6x
% y/y -32% 15% 16% 8% 1% 2% -4% 0.6x
Net Income -3,203 6,894 5,507 6,860 12,913 11,461 9,038 1.8 0.9x 0.4x
EBITDA, Adjusted 7,141 12,083 14,956 15,694 18,800 18,180 14,720 0.3x -1.2
-2.3
% EBITDA margin 27.9% 41.2% 44.0% 42.9% 50.8% 48.2% 40.5% 2015 2016 2017 2018 2019E2020E2021E
Interest Expense, Cash (842) (2,542) (2,795) (1,922) (1,210) (1,148) (793) Debt Profile (US$ bn)
Taxes - (2,151) (1,495) - (2,959) (3,462) (2,654)
5.8 5.1 5.2
Working Capital 1,287 105 746 (1,094) 301 (8) 40
CFO 7,586 7,495 11,412 12,678 14,932 13,563 11,313
Capex -8,400 -5,482 -3,843 -3,784 -5,600 -5,500 -5,400 1.2 1.9
1.0 1.1
FCF (814) 2,013 7,569 8,894 9,332 8,063 5,913
Dividends -1,500 -250 -1,456 -3,437 0 -4,614 -7,076
FCF, after dividends (2,314) 1,763 6,113 5,457 9,332 3,449 (1,163) Cash '19 '20 '21 '22 '23 '24+
Cash 3,591 4,262 4,328 5,784 12,290 13,131 9,859
Capital Markets 62% USD 88%
Total Debt, adj. 32,938 34,741 27,864 19,815 18,990 18,881 18,773
Develop. Agencies 21% BRL 11%
ST Debt 2,506 1,660 1,703 1,003 1,003 1,003 1,003
Net Debt, adj. 29,347 30,479 23,536 14,031 6,699 5,750 8,913 Bank Loans 17% Other 1%
Total Adj Debt / EBITDA 4.6x 2.9x 1.9x 1.3x 1.0x 1.0x 1.3x Shareholders
Adj Net Debt / EBITDA 4.1x 2.5x 1.6x 0.9x 0.4x 0.3x 0.6x Litel 21% Mitsui 6%
Interest Coverage 8.5x 4.8x 5.4x 8.2x 15.5x 15.8x 18.6x Bradespar 6% BNDES 6%
FCF / Net Debt -2.7% 6.9% 24.8% 38% 67% 120% 103% Free Float 61%
VALEBZ 5 7/8 06/10/21 281 104,72 1,98 3,57 115 125 VALEBZ 8 1/4 01/17/34 800 127,12 9,10 5,53 300 299
VALEBZ 4 3/8 01/11/22 1.069 102,16 2,54 3,54 117 124 VALEBZ 6 7/8 11/21/36 1.812 116,38 10,48 5,42 285 282
VALEBZ 3 3/4 01/10/23 750 107,28 3,48 1,72 183 218 VALEBZ 6 7/8 11/10/39 1.595 116,60 11,38 5,52 292 287
VALEBZ 6 1/4 08/10/26 2.000 109,63 5,86 4,68 231 230 VALEBZ 5 5/8 09/11/42 520 101,57 12,95 5,50 290 280
Handbook
Gerdau (BBB- {Pos} / Ba1 {Pos} / BBB-) Metals & Mining

Our view: Having been able to sustain consistently positive FCF generation and engaged in R$7bn asset sales over the past three
years, Gerdau has able to maintain a healthy capital structure, with net leverage now at 1.7x. Going forward, we expect FCF to be
curtailed as investments accelerate, but maintaining a very conservative leverage between 1-1.5x. Gerdau bonds have captured the
upside from its deleveraging cycle, now trading rather tight to other IG peers and the sovereign, with the Gerdau 27s (4.5% YTW,
214bps z-spread) trading 15bps inside Suzano, 20bps inside Braskem and 15bps to the sovereign. Nonetheless, we point out Gerdau
44s offer an interesting 143bps spread pick-up to the 27s and a 54bps pick-up to the sovereign.
Recent: (i) Investor Day highlights: 1) medium-term net leverage of 1-1.5x, 2) positive FCF despite the new investment cycle, and 3)
solid volumes outlook in Brazil; (ii) announcement of new 3-year capex plan of R$7.1bn and increase in dividend payout policy, (iii) in
April, the company announced a 10% price hike for long steel; (iv) weak Q4 results, with EBITDA down 30% q/q to R$1.4bn, driven
by lower profitability in specialty steel, lower DM volumes in Brazil and weak results from its LatAm unit (US delivered strong 10%
margins). The balance sheet continued to improve as the company delivered ~R$2bn FCF (driven by a R$1.4bn WK release), with net
leverage reaching a very comfortable 1.7x (down from 2.2x in Q3 and 3.0x a year ago).
Strengths: (i) management committed to deleveraging, remaining FCF positive throughout economic & commodity cycles, due to a
strong focus on cost controls, capex discipline, WK optimization and asset sales (R$7bn in past 3 years); (ii) geographic diversification
(~70% revenues from exports or abroad); (iii) strong liquidity, smooth debt profile, good access to capital markets & banks; (iv) play
on the Brazilian turnaround story, walking into a cycle of demand growth; (v) vertical integration in the scrap market and flexible
business model (75% of output from mini-mills).
Concerns: (i) slow recovery in Brazil driving sluggish volumes; (ii) risk of higher competition from imports (still muted), (iii) new
investment cycle and more dividends curtailing FCF generation.

Gerdau (R$ mn) 2015 2016 2017 2018 2019E 2020E 2021E FCF & Net Debt / EBITDA (R$ bn)
Total Volumes (mn tons) 17.0 15.6 14.9 14.6 12.4 12.7 13.1 4.3x
EBITDA margin - Brazil 13% 13% 15% 19% 18% 18% 18% 3.6x 1.7 1.7
3.0x 1.5 1.6
EBITDA margin - US 9% 8% 5% 9% 11% 11% 11% 2.0
EBITDA margin - LatAm 10% 14% 14% 18% 14% 15% 15%
EBITDA margin - Specialty 10% 13% 18% 16% 15% 15% 15% 1.7x
1.4 1.2 1.5x
Net Revenues 43,581 37,652 36,918 46,160 43,444 45,420 47,505 0.7x 0.4x
EBITDA, Adjusted 4,515 4,047 4,321 6,658 6,591 7,001 7,241
% EBITDA margin 10.4% 10.7% 11.7% 14.4% 15.2% 15.4% 15.2% 2015 2016 2017 2018 2019E 2020E 2021E
Interest Expense, Cash (1,402) (1,758) (1,500) (1,376) (952) (943) (860) Debt Profile (R$ bn)
Taxes (637) (168) (126) (299) (751) (1,044) (1,110) 4.3
Working Capital 2,428 970 (523) (1,456) (215) (202) (292) 3.3
CFO 4,904 3,091 2,172 3,528 4,672 4,812 4,979 2.3 2.4
1.8 1.6
Capex (2,324) (1,483) (873) (1,195) (2,400) (2,400) (2,450) 1.2 1.2
FCF 2,580 1,608 1,299 2,333 2,272 2,412 2,529
Dividends (549) (181) (86) (842) (639) (751) (783)
Cash '19 '20 '21 '22 '23 '24 '25+
FCF, after dividends 2,031 1,427 1,213 1,490 1,634 1,660 1,746
Total Debt 26,461 20,583 16,509 14,907 14,907 14,907 14,907 Bonds 65% BRL 26%
ST Debt 859 783 2,004 1,825 1,825 1,825 1,825 Working Capital 16% USD 74%
Net Debt 19,542 14,495 13,132 11,557 9,924 8,263 6,517 Debentures 11%
Other 8%
Total Debt / EBITDA 5.9x 5.1x 3.8x 2.2x 2.3x 1.2x 0.8x
Net Debt / EBITDA 4.3x 3.6x 3.0x 1.7x 1.5x 0.7x 0.4x Shareholders
Interest Coverage 3.2x 2.3x 2.9x 4.8x 6.9x 7.4x 8.4x Metalurgica Gerdau 34.2% Free Float 65.1%
FCF / Net Debt - 7.3% 8.4% 11.3% 14.1% 15.1% 16.4% Treasury 0.7%

GGBRBZ 7 01/20/20 319 103,05 0,74 2,93 33 54 GGBRBZ 5.893 04/29/24 875 108,34 4,08 3,96 164 167
GGBRBZ 5 3/4 01/30/21 505 104,21 1,68 3,30 84 96 GGBRBZ 4 7/8 10/24/27 650 102,24 6,78 4,56 215 213
GGBRBZ 4 3/4 04/15/23 518 103,22 3,63 3,87 155 159 GGBRBZ 7 1/4 04/16/44 500 113,49 11,78 6,17 358 347
Handbook
CSN (CCC+ {Pos} / B3 / B-) Metals & Mining

Our view: CSN has been benefitting from stronger operational performance, soaring iron ore prices, low interest rates, improving steel
industry in Brazil (sales mix, better international prices, gradual domestic recovery allowing price adjustments, low imports). We expect
continued strong FCF generation and asset sales (SWT, Usiminas preferred shares, iron ore streaming deal, etc) to drive CSN’s net
leverage to 3x by YE, providing room for further spread tightening. The recent IO prepayment deal boosts liquidity and increases
investors’ confidence in other potential transactions and in deleveraging. CSN bonds are an attractive play in our view, with the 23s
(7% YTW, 468bps z), newly issued 26s (7.785% YTM) and perps (7.86% YTW) offering tightening potential and a good carry. The
new 26s priced 60bps over Marfrig 25s, 40bps inside Gol 25s and the 23s trade 90bps wide to Marfrig 23s & 15 wide to Light 23s.
Recent: (i) solid Q4: R$1.56bn EBITDA (-4% q/q, +30% y/y), with healthy IO realized prices, and R$817mn FCF (partly due to WK)
driving leverage to 4.55x; (ii) US$500mn 5Y IO prepayment deal for 22Mt with Glencore (quasi-debt), (iii) rating agencies still deem
CSN’s capital structure unsustainable & requiring further monetization (>R$3bn); (iv) management: targeting 3x leverage by YE, 10-
15% steel price hikes in March, auto industry prices were readjusted by 25% in January, expect weaker steel demand in Q1 to rebound
in Q2; (v) CSN received bids for SWT, under negotiation; a streaming deal of up to US$1bn is also imminent acc to mgmt; (vi) liability
management for 2019/2020 bonds substantially improves debt profile and liquidity, raising odds for a rating upgrade.
Strengths: (ii) bullish outlook on IO prices offers major upside to CSN – S&D conditions look tight, majors remain highly disciplined
and no swing capacity expected to offset Vale’s “lost” production; (ii) vertically-integrated, diversified, low-cost producer & strong asset
base - IO cash costs at ~$20/t (FOB) & freight down to $14/t; (iii) potential asset sales/streaming deal in ST to rebalance capital
structure – could sell stake in Casa De Pedra (if in distress); (iv) strong beneficiary of lower interest rates in Brazil.
Concerns: (i) high leverage & large refinancing needs – leverage improved, but net debt remains high; (ii) capital discipline – risk of
more aggressive expansion (cement, galvanized steel) or higher dividend payouts due to high leverage at controlling shareholder -
dividend announced in 2018 was blocked by Courts & management expects minimum legal dividends of 25%; (iii) tailings dam risks
and potential temporary shutdowns: two dams under decommissioning (B4/B5) and only one operational (CdP); CSN currently at 60%
dry IO processing aiming to reach 100% by YE after installing 2nd filtering unit. (iv) potential removal of import tariffs (potential impact
~20% of EBITDA), although we see it as unlikely in short term. (v) exposed to global/domestic growth, FX/commodity price volatility.

CSN (R$ mn) 2015 2016 2017 2018 2019E 2020E 2021E FCF & Net Debt / EBITDA (R$ bn)
Iron Ore Volumes (M tons) 31 37 33 35 35 36 37 2.7
Iron Ore, $/t 56 58 71 69 76 75 65 2.0 2.2 1.7
7.9x
Steel Volumes (M tons) 4.1 3.9 3.9 4.1 4.1 4.3 4.5 0.3 0.6
Price HRC (Dom)-R$/ton 2,276 2,499 2,757 3,099 3,377 3,445 3,514
Net Revenues 15,332 17,181 18,525 22,969 25,797 26,680 26,627 6.1x 5.5x
4.4x
EBITDA, Adjusted 3,251 4,076 4,645 5,849 7,524 7,470 6,494 3.1x 2.9x 3.0x
-2.3
% EBITDA margin 21.2% 23.7% 25.1% 25.5% 29.2% 28.0% 24.4%
Interest Expense, Cash (2,692) (2,813) (2,476) (1,891) (2,016) (1,787) (1,623) 2015 2016 2017 2018 2019E 2020E 2021E
Taxes (189) (356) (409) (250) (725) (1,035) (828) Debt Profile (R$ bn)
Working Capital (519) 1,028 (82) 636 (400) (44) (83)
6.8
CFO (149) 1,935 1,678 4,344 4,383 4,604 3,960 5.7
Capex (1,616) (1,638) (1,065) (1,319) (1,500) (1,600) (1,500) 4.1 4.5
3.1 3.4 3.2
FCF (1,765) 297 613 3,025 2,883 3,004 2,460 1.3
Dividends (559) 0 0 (289) (850) (776) (745)
FCF, after dividends (2,324) 297 613 2,736 2,033 2,228 1,714
Cash '19 '20 '21 '22 '23 '24+ '25+
Asset Sale 0 0 0 1,552 0 0 0
Cash 8,625 5,632 4,147 3,144 7,027 6,754 8,469
Bonds 39% BRL 44%
Total Debt 34,283 30,441 29,511 28,827 30,677 28,177 28,177
Pre-Payment 17% USD 55%
ST Debt 1,875 2,117 6,527 5,653 6,016 5,526 5,526
Banks & Other 44% EUR 1%
Net Debt 25,658 24,809 25,364 25,683 23,650 21,423 19,708
Other 0%
Interest Coverage 1.2x 1.4x 1.9x 3.1x 3.7x 4.2x 4.0x Vicunha & Rio Iaco 53.2% Treasury 0.5%
FCF / Net Debt - 1.2% 2.5% 10.8% 7.9% 9.4% 8.0% Free Float 46.3%

CSNABZ 6 7/8 09/21/19 547 101,61 0,43 3,09 46 67 CSNABZ 7 5/8 04/17/26 600 98,70 na 7,88 na na
CSNABZ 6 1/2 07/21/20 1.053 101,86 1,19 4,96 243 261 CSNABZ 7 PERP 1.000 89,00 12,65 7,86 535 515
CSNABZ 7 5/8 02/13/23 350 101,99 3,24 7,02 468 472
Handbook
CMPC (BBB- / Baa3 / BBB) Pulp & Paper

Our view: CMPC’s FCF generation has been strong since 2017, benefitting from pulp price recovery, driving the long expected
deleverage since the conclusion of the Guaíba mill in late 2015 - net leverage moved from 3.0x at FY2017 to 1.6x in FY2018. Given
the stable outlook for the pulp market over the next two years and no major capex needs, we expect the company to continue posting
strong cash flows and further leverage reduction. CMPC bonds look fairly priced, trading in line with Celara and ~50bps inside Suzano.
CMPC bonds rightfully trade at a tighter level vs. other Chilean IG names (83bps, 3bps and 40bps inside Cenco, Falabella and Entel,
respectively), due to its high share of dollarized revenues and defensive product mix.
Recent: (i) Q4: strong revenues but with higher than expected costs. Revenues were up 24% y/y to US$1.62bn, on higher paper/tissue
sales, while EBITDA rose 57% y/y to US$403mn. Pulp: sales jumped 26% y/y to US$807mn, led by BEKP volumes. BSKP sales were
down 16% y/y, on scheduled maintenance at the Laja mill; EBITDA grew by 74% y/y reflecting normalized production at Guaíba, higher
pulp prices and higher sales volumes. Cash costs were down 4% YoY for BEKP and up 10% for BSKP, on higher energy expenses.
Packaging: revenues rose 15% y/y to US$222mn, while EBITDA declined 11% y/y to US$11mn, on higher pulp costs. Tissue: sales
were up 4% y/y to US$509mn, while EBITDA was down 35% y/y to US$25mn, on higher fiber costs, and gas prices in Mexico.
Strengths: (i) strong FCF generation and solid B/S; (ii) leading market position in tissue across Latam; (iii) defensive product mix, (iv)
strong business portfolio and geographical diversification; (v) vertical integration; (vi) opportunities from plastic bags ban in Chile
Concerns: (i) exposure to pulp prices/FX volatility; (ii) potential increase in competition in tissue;

CMPC (US$ mn) 2015 2016 2017 2018 2019E 2020E 2021E FCF & Net Debt / EBITDA (US$ mn)
Softwood price (USD/Ton) 639 577 673 839 733 733 673
Hardwood price (USD/Ton) 607 500 593 745 750 705 645 3,7x 3,8x 3,0x
672 959 887 779
Net Revenues 4.841 4.866 5.143 6.274 6.230 6.199 6.091 223 475
Pulp EBITDA 581 507 692 1.499 1.385 1.255 1.045 -443
Tissue EBITDA 225 242 215 153 167 194 244 1,6x 1,3x 1,0x
0,8x
Packaging EBITDA 133 110 86 81 115 119 123
EBITDA, Adjusted 1.099 966 1.078 1.816 1.751 1.654 1.499
% EBITDA margin 22,7% 19,9% 21,0% 28,9% 28,1% 26,7% 24,6%
Taxes (421) 17 (17) (378) (219) (202) (170) Debt Profile (US$ mn)
Working Capital (65) (99) 107 (190) (11) (2) 13 968 1.080 1.107
CFO 426 675 949 1.033 1.359 1.287 1.179 642
Capex (869) (452) (474) (361) (400) (400) (400) 400
220 170 202
FCF -443 223 475 672 959 887 779
Dividends -30 -36 -5 -119 -216 -220 -170
Cash '19 '20 '21 '22 '23- '25- '32-
FCF, after dividends -473 186 471 553 742 667 609 24 31 41
Cash 585 629 833 968 1.589 2.147 2.657 Debt Breakdown Exposure
Total Debt, adj. 4.194 4.272 4.116 3.875 3.875 3.875 3.875 Bonds 21% USD 90%
ST Debt 252 377 335 439 439 439 439 Banks 79% CLP 3%
Net Debt, adj. 3.610 3.643 3.283 2.908 2.286 1.729 1.219 BRL 3%
Shareholders
Matte Group 53%
Adj Net Debt / EBITDA 3,7x 3,8x 3,0x 1,6x 1,3x 1,0x 0,8x
Chilean Pension Funds 10%
Interest Coverage 5,2x 4,6x 4,9x 8,4x 10,8x 10,2x 9,2x
Free Float 34%
FCF / Net Debt -12,3% 6,1% 14,5% 23,1% 41,9% 51,3% 63,9%

CMPCCI '19 6,125 05-11-2019 184 N No BBB- / Baa3 / BBB 101,80 0,53 2,84 22 42
CMPCCI '22 4,5 25-04-2022 500 Y No BBB- / Baa3 / BBB 102,25 2,54 3,64 127 133
CMPCCI '27 4,375 04-04-2027 500 N No BBB- / Baa3 / BBB 101,28 6,67 4,18 179 178
Handbook
Klabin (BB+ / BB+) Pulp & Paper

Our view: Klabin’s deleverage has at last picked up speed, benefitting from strong pricing in pulp and paper products (after a slower-
than-expected deleverage following the Puma plant ramp-up). However, it is still uncertain how sustainable this deleverage is, since
the company has been studying expansion projects over 2019-2023, which could curtail FCFs and keep net leverage closer to the 3.0-
4.0x range (still not incorporated into our base case). Klabin bonds offer a 50-60bps pick-up to Suzano and 20bps to Ultrapar, which
we deem warranted given expectations of higher leverage for longer due to a potential new expansion cycle. At the same time, it offers
a decent carry for a rather defensive business benefitting from a very strong operating environment.
Recent: (i) Sequentially strong Q4: R$1.1bn EBTIDA and R$480mn FCF driving net leverage down to 3.1x, benefitting from high pulp
and kraftliner prices, improving domestic market for paper (FY EBITDA up 47% y/y driving R$800mn FCF generation); (ii) new
challenge with early termination of Fibria sale agreement, focusing on medium-sized clients aiming for higher price realization; (iii)
undergoing a cultural shift with 50% of directors turnover in last 1-2 years; (iv) tighter regulations on non-renewable resources globally
helps demand for paper-based products (e .g.: plastic straw ban in EU).
Strengths: (i) stable & defensive business with leading market position in packaging (high exposure to consumer staples, concentrated
in the resilient food industry), benefitting from larger scale, cost competitiveness, longstanding relationship with clients; (ii) high vertical
integration allows higher operating efficiency & margins (large forestry base with 230k ha of planted forests on 490k ha of owned land);
(iii) comfortable liquidity (R$7bn cash) and low refinancing risk + flexibility with asset base (R$2bn in land and R$4.6bn in biological
assets); (iv) improving credit metrics since start-up of Puma plant, coupled with strong momentum in pulp markets (~1/3 of revenues).
Concerns: (i) potential expansion projects could limit FCFs and deleverage - Board pondering a new investment cycle for 2019-2023
in integrated kraftliner and coated boards (possibly ~US$2bn capex), which could keep net leverage above 3x for longer (mgmt.
expects leverage would not surpass 4.5x even under stress); (ii) high leverage following Puma expansion (1.5mt pulp) with slower
than expected deleverage cost the company its investment grade; (iii) exposure to cyclical pulp business (1/3 of sales) and potential
downturns in the Brazilian economy (55-60% of sales in DM).

Klabin (R$ mn) 2015 2016 2017 2018 2019E 2020E 2021E FCF & Net Debt / EBITDA (R$ bn)
Paper Volumes (k tons) 1,833 1,852 1,868 1,768 1,817 1,857 1,857 6.3x 1.0
0.8 0.9 0.8
Paper, blended (US$/ton) 872 855 942 929 937 964 990 5.3x 0.5
Pulp Volume (k tons) 0 797 1,357 1,402 1,470 1,470 1,470
Pulp BEKP (US$/ton) 740 696 805 1,036 975 1,000 900
4.2x
Net Revenues 5,688 7,091 8,373 10,016 10,679 11,102 10,885 3.1x 2.7x 2.4x 2.5x
% y/y 16% 24.7% 18.1% 19.6% 6.6% 4.0% -2.0% -2.2
EBITDA, Adjusted 1,967 2,279 2,698 4,023 4,029 4,186 3,863 -3.5
Interest Expense, Cash (267) (352) (540) (1,054) (1,014) (968) (920) Debt Profile (R$ bn)
Taxes - (733) (306) - (277) (285) (307)
7.0
Working Capital (227) (367) (106) (370) 31 (93) 33
CFO 1,474 827 1,745 2,599 2,768 2,841 2,668
4.9
2.4 3.1 2.7
Capex (4,628) (2,565) (879) (957) (1,000) (1,000) (1,000) 2.0 2.0 2.3
FCF (3,154) (1,738) 866 1,642 1,768 1,841 1,668
Dividends (378) (458) (377) (840) (830) (806) (837)
FCF, after dividends (3,532) (2,196) 489 802 938 1,035 831 Cash '19 '20 '21 '22 '23 '24 '25+
Total Debt 18,022 18,469 19,549 19,446 18,788 18,788 18,788 Trade & Export Fin. 46% BRL 28%
ST Debt 2,046 2,850 2,470 1,975 1,975 1,975 1,975 Bonds 20% USD 72%
Net Debt 12,411 12,005 11,278 12,398 10,995 10,166 9,541 BNDES 10%
Other 24%
Interest Coverage 7.4x 6.5x 5.0x 3.8x 4.0x 4.3x 4.2x Monteiro Aranha 8.6% BNDES 6.8%
FCF / Net Debt - -17.7% 4.1% 7.1% 7.6% 9.4% 8.2% Bank of NY 7.3% Others 77.3%

KLAB '24 5,25 16-07-2024 271 N No BB+ / - / BB+ 103,00 4,51 4,60 227 230
KLAB '27 4,875 19-09-2027 500 N No BB+ / - / BB+ 97,59 6,79 5,23 283 281
KLAB '29 5,75 03-04-2029 500 Y No BB+ / - / BB+ 99,88 7,49 5,77 332 329
KLAB '49 7 03-04-2049 500 Y No BB+ / - / BB+ 100,57 12,42 6,95 435 419
Handbook
Suzano (BBB- / Ba1 / BBB-) Pulp & Paper

Our view: Suzano bonds trade tight to the sovereign in the range of 20-30bps over (Suzano 29s at 5.1% YTW, 264bps z-spread),
nonetheless we see value in the carry due to its very favorable momentum (high pulp prices expected over next couple of year), strong
deleverage as it extracts synergies from the merger with Fibria (we expect net leverage to come down to 2.5x by 2019-end) and as it
offers a good hedge to political uncertainties in Brazil, with nearly 100% of revenue exposure to the USD and little domestic exposure.
Recent: (i) Suzano Day highlights: management guided for merger operational synergies of R$800-900mn/year (NPV at near R$7.8bn)
and tax savings in the vicinity of R$4.7bn, for a total NPV of synergies of around R$12.5bn. Suzano does not expect to engage in any
major capacity expansion projects before net leverage is back at 3.0x level, with management pursuing a net debt figure of US$10bn
(with net leveraged capped at 1-3x during a normal cycle and maximum of 3.5x during an investment cycle); (ii) weak Q4 results,
reflecting temporary slowdown in pulp markets late last year (“buyers´ strike” in China), with pro-forma EBITDA down 34% q/q to
R$3.55bn on lower pulp shipments (-28% q/q) and weaker pulp cash cost performance (up 14% q/q to R$669/t, on lower fixed cost
dilution and energy sales). For the FY, consolidated EBITDA stood at R$16.4bn, up 70% y/y, with operating cash generation at
R$12.5bn (up 92% y/y). Proforma net debt came in at R$52.2bn, with net leverage ending the year at 3.2x.
Strengths: (i) high pulp prices supported by balanced S&D outlook over next couple of years, with limited capacity coming online; (ii)
strong FCF generation and strong deleveraging momentum, with potential for very sizeable synergies from merger with Fibria; (iii)
defensive play in a scenario of a Brazilian downturn, benefiting from BRL depreciation; (iv) economies of scale, low-cost pulp, vertically
integrated producer.
Concerns: (i) highly cyclical industry, volatile FX/commodity prices; (ii) potential M&A and new expansion projects (such as Tres
Lagoas); (iii) high pulp inventories may take time to normalize.

Suzano (R$ mn) 2015 2016 2017 2018 2019E 2020E 2021E FCF & Net Debt / EBITDA (R$ bn)
Pulp Sales, kt 3,291 3,530 3,615 3,226 9,714 10,464 10,573 7.0 6.5
0.6 -0.3 1.2
Paper, kt 1,230 1,196 1,180 1,254 1,276 1,313 1,340 0.4
BEKP (US$/ton, EU) 784 699 805 1,036 945 1,000 900 2.7x 2.7x 2.9x
Pulp, net 602 499 598 745 683 728 653 2.0x 2.1x 2.0x
1.6x
Net Revenues 10,224 9,882 10,521 13,437 29,966 33,449 30,628
Net Income (925) 1,699 1,802 311 10,153 9,917 8,458
EBITDA, Adjusted 4,489 3,883 4,655 6,561 16,316 19,041 16,678 -25.6
Interest Expense, Cash (970) (795) (913) (1,041) (3,094) (2,301) (1,970) Debt Profile (R$ bn) - Consolidated Pro-Forma
Taxes - (726) (432) - (1,128) (2,479) (2,114) 28.6
Working Capital (1,023) 268 (549) (856) (2,136) 260 575
CFO 2,497 2,630 2,762 4,664 9,958 14,521 13,169
11.0 8.3 9.5
Capex (1,742) (2,637) (1,755) (2,796) (35,000) (5,000) (3,950) 5.6 4.5 5.9
FCF 755 (6) 1,006 1,869 (25,042) 9,521 9,219
Dividends (195) (300) (571) (710) (569) (2,538) (2,672)
Cash '19 '20 '21 '22 '23 '24+
FCF, after dividends 560 (306) 436 1,159 (25,611) 6,983 6,547
Cash 2,448 3,695 2,708 25,486 11,674 8,714 7,392 Bonds 35% BRL 81%
Total Debt 14,711 14,013 12,192 35,738 59,276 49,276 41,198 Export Financing 31% USD 19%
ST Debt 1,819 1,595 2,115 3,427 5,676 4,717 3,950 Agricultural CRA 10%
Net Debt 12,263 10,317 9,484 10,251 47,602 40,562 33,807 BNDES 5%
Total Debt / EBITDA 3.3x 3.6x 2.6x 5.4x 3.6x 2.6x 2.5x Other 19%
Interest Coverage 4.6x 4.9x 5.1x 6.3x 5.3x 8.3x 8.5x Feffer Family & Rel. 45.7% Votorantim 5.5%
FCF / Net Debt - -2.5% 4.2% 12.2% -250% 14.7% 16.1% BNDES 11.0% Other 37.8%

SUZANO '21 5,875 23-01-2021 186 N No BBB- / Ba1 / BBB- 104,54 1,66 3,22 75 88
SUZANO '26 5,75 14-07-2026 700 N No BBB- / - / BBB- 106,75 5,86 4,64 227 226
SUZANO '29 6 15-01-2029 1.750 Y No BBB- / - / BBB- 106,91 7,17 5,07 264 261
SUZANO '47 7 16-03-2047 1.000 Y No BBB- / - / BBB- 111,59 12,82 6,12 352 337
Handbook
BRF (BB- / Ba2 {Neg} / BB) Proteins

Our view: BRF faced a turbulent couple of years impacted by trade embargos, grain prices, new halal export rules, poor operating
results and rising leverage. We now see BRF bringing about a more focused strategy of improving operating efficiency and recovering
pricing power. While BRF’s divestment plan (Argentina, Europe and Thailand + WK optimization) came in below expectations, we do
expect margins to recover in 2019 under a combination of a turning poultry cycle in Brazil higher, a benign grain price scenario and
opportunities arising from the outbreak of African Swine Fever in China. Yet, we still see the company having a tough time to deliver
net leverage multiple below 4x by YE19, comparing unfavorably with other Brazilian protein peers. BRF bonds seem to already price
in a lot of the expected turnaround, and seem tight given deleverage expectations, with BRF 26s trading in line with JBS 26s at 6.3%
YTW and 391bps z-spread.
Recent: (i) Q4 sequentially weak, with EBTIDA of R$708mn at a 7.4% margin (several one-offs), pressured by higher feed costs and
higher indirect costs; net debt pro-forma for monetization plan stood at R$13.4bn; (ii) Carne Fraca woes compounded with truckers’
strike in Brazil, disrupting BRF’s supply chain; (iii) Shutdown of Russian pork market to Brazilian exporters + closing of EU market to
BRF, resulted in domestic oversupply domestically (preventing price increases to offset grain prices), leading to supply cuts; (iv) recent
SECEX data showed initial signs of turning of the poultry cycle, with higher prices; (v) BRF guided for 3.65x net leverage YE19,
implying an EBITDA of ~R$3.5bn & 10-11% margin, while also placing COO Lourival Luz in the CEO succession line.
Strengths: (i) strong brand awareness and market share in Brazil, sizeable distribution platform & large share of processed and value
added food; (ii) management committed to improving efficiency, recover pricing power and reduce leverage, while maintaining
adequate liquidity; (iii) poultry cycle improving in Brazil after recent supply cuts, leading to higher prices; (iii) ASF outbreak in China
opens opportunities to capture higher prices; (iv) corporate governance improving amid realignment of BoD and management.
Concerns: (i) intrinsic sector risks and lower resilience to absorb external shocks, such as FX, grain price volatility, S&D shifts,
competition, sanitary & trade barriers; (ii) high leverage and slower deleverage trend, as visibility on margin recovery remains low; (iii)
potential contingent liabilities related to Carne Fraca investigation; (iv) trade restrictions – Russia and EU embargo, Chinese
antidumping fees, new Halal slaughtering process and higher protectionism in Saudi Arabia – no expectation EU reopening in ST.

BRF (R$ mn) 2015 2016 2017 2018 2019E 2020E 2021E FCF & Net Debt / EBITDA (R$ bn)
Total Volumes (k tons) 4,515 4,687 4,919 4,973 4,763 4,941 5,111
-2.9 6.0x 0.1 0.4 0.5
Average Price, R$/kg 7.1 7.2 6.8 7.0 7.3 7.6 7.9 -1.6 -0.4
% y/y 16% 0.9% -5.5% 2.6% 3.9% 4.4% 4.8%
COGS/kg, R$/kg 4.9 5.6 5.4 5.9 5.8 5.9 6.2 4.4x -0.9 4.1x 3.3x
% y/y 2% 14.2% -2.6% 8.8% -2.3% 2.5% 4.7% 3.3x 3.0x
Net Revenues 32,195 33,732 33,467 34,709 34,553 37,431 40,577 1.4x
EBITDA, Adjusted 5,321 3,385 3,027 2,615 3,227 4,044 4,406
Interest Expense, Cash 34 (2,616) (1,776) (1,586) (1,362) (1,135) (1,136) Debt Profile (R$ bn)
Taxes - (50) - - - (102) (155)
Working Capital (240) 647 (515) (339) (58) (131) (124) 6.7
CFO 5,116 1,366 736 690 1,807 2,677 2,991 4.8 4.8
3.4 2.9 3.1 3.4
Capex (2,153) (2,595) (1,617) (1,635) (1,696) (1,840) (1,995)
FCF 2,963 (1,229) (881) (945) 111 837 996
Dividends (4,573) (1,713) 510 0 0 (410) (534)
FCF, after dividends (1,610) (2,942) (371) (945) 111 427 462 Cash '19 '20 '21 '22 '23 '24+
Cash 8,509 8,350 7,435 6,711 4,020 4,448 4,909
Bonds 44% BRL 47%
Total Debt 15,846 19,492 20,743 22,400 17,400 17,753 18,117
ST Debt 3,295 3,775 5,330 4,782 4,782 4,782 4,782 Working Capital 26% USD 53%
Net Debt 7,337 11,142 13,308 15,689 13,380 13,306 13,208 Export Facility 14%
CRA - Agric. Certif. 12%
Interest Coverage - 1.3x 1.7x 1.6x 2.4x 3.6x 3.9x Petros 11.5% Tarpon 8.6%
FCF / Net Debt - -40.1% -3.3% -7.1% 0.7% 0.0% 3.5% Funcef 10.7% Others 69.3%

BRFSBZ '20 7,25 28-01-2020 86 N No BB- / Ba2 / BB 101,74 0,75 4,95 235 255
BRFSBZ '26 4,35 29-09-2026 500 N No BB- / - / BB 88,67 6,16 6,28 390 389
Handbook
JBS (BB- {Pos} / Ba3 / BB-) Proteins

Our view: We expect strong results & FCF over US$1bn/year to drive leverage to the 2x range, as JBS benefits from positive protein
cycles across most geographies and opportunities arising from the ASF outbreak in China. Although legal matters are still pending,
JBS achieved a comfortable liquidity position following asset sales, debt extension with banks and liability management. We believe
JBS bonds offer a good carry with further upside from a potential IPO in the US. JBS SA bonds (BZ HoldCo) trade at an attractive
spread pick-up to the JBS USA curve (100bps on the 24s and 110bps on the 26s vs. 25s), and offer an interesting spread pick-up vs.
BB rated peers – JBS 26s trade flattish to BRF 26s, 50bps over Rumo 25s, and 10bps inside Minerva 26s.
Recent: (i) Q4 slightly weaker than expected with EBITDA of R$3.4bn at a 7.2% margin and modest FCF of R$0.5bn; Brazilian beef
unit reported a weak 3.9% margin, while Seara was the highlight (10.3% margin); (ii) management overhaul announced, with the hiring
of Guilherme Cavalcanti as CFO, while Gilberto Tomazoni took over CEO position – management tagerting 2x leverage YE19; (iii)
rating upgrades to BB- by S&P and Ba3 by Moody’s in Oct/2018; (iv) bond liability management exercises (Oct/2018 and April/2019);
(iv) May/2018: extension of debt normalization agreement with banks (R$12bn until Jul/2021); (v) recent negative headlines on
controlling shareholders (e.g. Operation Bullish) and Pilgrim’s minority shareholder lawsuit questioning MoyPark acquisition.
Strengths: (i) large scale & substantial protein / geographic diversification, with efficient operations and strong access to relevant
consumer markets despite trade restrictions; (ii) positive protein cycles across most geographies and opportunities from the ASF
outbreak in China; (iii) Plans to resume IPO in the US; (iv) more professional management team and conservative leverage guidelines;
(v) stabilization of liquidity, with asset sales to the tune of ~US$2.2bn (Mercosul, Five Rivers, MoyPark, Vigor) and debt term out.
Concerns: (i) corporate governance and pending internal investigation; (ii) potential liabilities from settlements of corruption
investigations (US DoJ, Brazilian SEC & IRS) – we expect no material fines/impact on credit metrics and expect JBS to remain
protected by J&F leniency agreement; (iii) exposure to cyclical industry & FX, with volatility in feedstock/protein prices; (iv) capital
discipline - aggressive M&A track record and hedging policy in the past; (v) low disclosure in Q results.

JBS (R$mn) 2015 2016 2017 2018 2019E 2020E 2021E FCF & Net Debt / EBITDA (R$mn)
% EBITDA mg, JBS Brazil 8.1% 6.0% 0.4% 4.5% 7.5% 7.5% 7.0%
% EBITDA mg, Seara 18.0% 8.8% 9.0% 8.7% 9.5% 10.0% 11.0%
4.2x 4.9 4.8 5.0 4.8
3.5x 3.4x
% EBITDA mg, JBS USA Beef 2.7% 2.3% 6.0% 8.0% 7.2% 6.2% 5.2%
% EBITDA mg, JBS USA Pork 10.1% 11.5% 12.6% 9.4% 10.5% 9.7% 9.0%
3.2x
% EBITDA mg, Pilgrim's 14.8% 11.3% 12.9% 7.3% 10.0% 9.5% 9.5% 1.9 2.5x 2.3x 2.1x
Net Revenues 162,915 170,381 163,170 181,680 193,540 202,079 210,215
EBITDA, Adjusted 13,301 11,287 13,416 14,850 16,342 15,929 15,599 -7.1 -9.0
Interest Expense, Cash (3,174) (3,600) (3,494) (4,024) (3,677) (3,453) (3,389) Debt Profile (R$mn)
Taxes (2,530) (1,543) (1,037) (2,508) (2,355) (1,885) (1,776)
Working Capital 265 (2,959) (4,010) (1,287) (754) (438) (391) 13.1 13.3 16.0
CFO 7,385 3,667 5,202 7,443 9,557 10,152 10,043 8.9
Capex (20,600) (3,813) (2,939) (1,997) (3,097) (3,840) (3,994) 4.5 5.8
2.9
FCF (13,215) (146) 2,263 5,446 6,460 6,313 6,049 0.5
Dividends (3,495) (2,869) (409) (629) (1,663) (1,303) (1,213)
Derivatives 9,639 (5,983) 95 132 0 0 0 Cash '19 '20 '21 '22 '23 '24 '25+
FCF, after dividends (7,071) (8,999) 1,949 4,949 4,797 5,010 4,835 Debt Breakdown Exposure
Bonds 49% BRL 5%
Cash 18,844 9,356 11,741 8,936 12,486 20,091 19,811
26%
Term Loans & Credit Facilities HC 95%
ST Debt 20,907 18,149 13,526 2,923 -2,595 10,115 14,266
Net Debt 47,039 46,905 45,283 47,218 41,241 36,557 32,047 Trade & Export Fin. 20%
Other 5%
Interest Coverage 1.6x 1.1x 2.4x 3.0x 4.4x 4.6x 4.6x J&F Investimentos 40.6% Treasury 2.4%
FCF / Net Debt -28.1% -19.1% 4.2% 10.9% 10.2% 12.1% 13.2% BNDES 21.3% Free Float 35.8%

JBS USA '21 7,25 01-06-2021 662 Y No BB- / Ba3 / - 100,59 0,13 2,55 -9 16
JBSSBZ '23 6,25 05-02-2023 775 Y No BB- / - / BB- 101,39 1,67 5,42 296 293
JBSSBZ '24 7,25 03-04-2024 750 Y No BB- / - / BB- 103,37 2,64 5,99 363 335
JBS USA '24 5,875 15-07-2024 750 Y No BB- / Ba2 / - 102,61 2,90 4,99 265 238
JBS USA '25 5,75 15-06-2025 900 Y No BB- / Ba2 / - 102,18 3,61 5,16 284 257
JBSSBZ '26 7 15-01-2026 1.000 Y No BB- / Ba3 / BB- 102,86 3,94 6,29 397 383
JBS USA '28 6,75 15-02-2028 900 Y No BB- / Ba2 / - 103,80 5,39 6,06 370 346
JBS USA '29 6,5 15-04-2029 1.000 Y No BB- / Ba2 / - 102,16 6,19 6,15 376 356
Handbook
Marfrig (BB- / B2 / BB-) Proteins

Our view: Marfrig bonds offer an attractive carry and pick-up to Minerva (80bps) and JBS (+70-90bps), which we attribute to concerns
over resumption of expansion strategy, its aggressive growth track-record and the need to demonstrate consistent positive FCF
generation & low leverage. The acquisition of National Beef for US$969mn in Q2 and sale of Keystone for US$2.4bn in 2H18 has re-
shaped the company and increased its focus on beef, while driving its pro-forma leverage to a low of 2.4x YE. However, adjusting for
the 49% minority ownership at NB, Marfrig’s leverage would be closer to low 3x). We expect strong results and positive FCF generation
ahead, as it benefits from a positive cattle cycle both in Brazil & the US (still negative in Uruguay) and falling financial expenses.
Recent: (i) Q4: messy and below expectations with EBITDA of R$877mn at a 8.4% margin and R$826mn in export-related tax credit
write-offs, although FCF was R$380mn with pro-forma leverage reaching 2.4x; (ii) Ex-CFO Mr. Miron was named CEO with mandate
to improve efficiency, reduce leverage and prioritize organic growth; (iii) 2 acquisitions from BRF in Dec/2018: Quickfood (Argentina)
for US$60mn EV and a beef/hamburger facility in Mato Grosso for R$100mn; (iv) March/2019: NB announced US$150mn acquisition
of Iowa Premium (1.1k heads, US$644mn revenues), but minorities will contribute.
Strengths: (i) positive cattle cycle in the US and Brazil over next 12-18 months supports profitability; (ii) better leverage profile after
sale of Keystone, with expected lower interest burden supporting higher cash flows; (iii) strong liquidity position; (iv) possible
opportunities arising from ASF outbreak in China; (v) strengthening of USD is accretive to Marfrig.
Concerns: (i) concerns over potential resumption of more aggressive expansion strategy, given recent M&As (although accretive) and
past history of aggressive debt-funded growth & asset divestments; (ii) National Beef 49% minority ownership drives cash leakage &
risk of put execution against Marfrig in future – higher leverage if adjusted for this off-balance sheet liability; (iii) intrinsic sector risks:
FX & commodity price volatility, cyclicality, sanitary & trade barriers, strikes and volatility in WK; (iv) still high financial expenses and
limited track record of positive FCF generation / capital discipline; (v) reduced disclosure level – no breakdown between US & amp;
South America operations.

Marfrig (R$ mn) 2015 2016 2017 2018 2019E 2020E 2021E FCF & Net Debt / EBITDA (R$ bn) - Pro-Forma 2018
Beef. Brazil (ton) 499 593 629 n/a n/a n/a n/a 0.8 0.5
0.4 0.3 0.4
%YoY -13% 19% 6% n/a 4% 3% 1% 3.7x
Brazil Beef, % of Revenues 52% 51% 52% 43% 32% 32% 33% 4.0x 4.7x
Net Revenues 18,892 19,334 18,578 29,715 42,422 44,153 45,327 0.0
% y/y -10% 2% -4% 60% 43% 4% 3% 2.4x 2.0x 2.0x 1.9x
EBITDA, Adjusted 1,791 1,593 1,708 2,601 3,710 3,574 3,438
% EBITDA margin 9.5% 8.2% 9.2% 8.8% 8.7% 8.1% 7.6% -1.6
Interest Expense, Cash (2,028) (1,956) (1,718) (1,926) (1,670) (1,391) (1,354) 2015 2016 2017 2018 2019E 2020E 2021E
Taxes (99) (102) - - (611) (508) (470) Debt Profile (R$ bn)
Non-Cash/Other 59 152 124 73 - - - 7.2
Working Capital 1,133 822 (925) (324) (106) (54) (52)
CFO 857 509 (810) 424 1,324 1,621 1,563 3.7 3.8 3.9
2.8
Capex (448) (526) (824) (4,344) (848) (883) (907) 0.2 0.2 0.7
FCF 409 (17) (1,634) (3,920) 475 738 657
Dividends 0 0 0 (471) (200) (267) (217) Cash '19 '20 '21 '22 '23 '24 '25+
FCF, after dividends 409 (17) (1,634) (4,392) 275 471 439
Cash 5,004 5,279 4,402 7,192 3,801 4,070 4,332
Bonds 84% BRL 1%
Total Debt 12,122 11,087 12,427 15,257 11,243 11,116 11,009
ST Debt 2,371 1,839 2,024 3,854 201 178 651 Trade & Export Fin. 10% USD 99%
Net Debt 7,118 5,872 8,025 8,053 7,430 7,033 6,666 Banks 5%
Other 0%
Interest Coverage 0.9x 0.8x 1.0x 1.4x 2.2x 2.6x 2.5x MMS Participacoes 37.0% BNDES 33.7%
FCF / Net Debt - -0.2% -27.8% -54.7% 3.4% 6.3% 6.2% Brandes Inv. Partners 10.0% Others 19.2%

MRFGBZ '19 6,875 24-06-2019 508 Y No BB- / B2 / BB- 100,60 0,19 3,66 105 130
MRFGBZ '21 11,25 20-09-2021 28 Y No BB- / B2 / BB- 101,53 0,42 7,53 492 511
MRFGBZ '23 8 08-06-2023 1.000 Y No BB- / B2 / BB- 103,67 1,91 6,14 372 371
MRFGBZ '24 7 15-03-2024 750 Y No BB- / - / BB- 101,26 3,37 6,63 430 418
MRFGBZ '25 6,875 19-01-2025 1.000 Y No BB- / - / BB- 98,06 4,60 7,29 495 492
Handbook
Cencosud (Baa3 {Neg} / BBB-) Consumer

Our view: Cencosud continues to struggle with weak economic conditions in Argentina and Brazil, sluggish top line growth in Chile,
high competition and limited investments in its more profitable markets. The timely IPO of its Shopping Center division (ex Argentina)
continues to be the main driver for the credit story, driving substantial deleverage and avoiding the loss of its IG rating. Cencosud’s
bonds have tightened considerably YTD, with average spread tightening of 90-105bps across its 23s, 25s and 27s and a relevant
spread tightening to Falabella’s curve – 20-40bps tighter relatively to the Chilean peer, now trading 70-90bps over Falabella. We
believe that Cencosud should trade with at least a 60bps premium vs. Falabella and see limited upside potential once the IPO
materializes (10-30bps).
Recent: i) Cencosud published weak and uneventful 4Q18 results, with sales down 7.7% y/y, ex IAS 29 accounting effect
(hyperinflation adjustment in Argentina) affected mainly by ARS and BRL devaluation and sluggish sales growth in Chile. EBITDA
declined 22.9% y/y (margin -139bps), partly impacted by one-off severance payments, but still faced y/y declines across all regions,
mostly due to higher promotional activity and increased logistics costs (except Brazil, with positive EBITDA for the first time since
4Q16). Net leverage remains very high at 4.7x; (ii) Cencosud guided for a net debt / EBITDA ratio at or below 3.0x by 2019-end; (ii)
Cenconsud filed with the Chilean regulator (CMF) for the IPO of its Shopping Malls division, targeting US$1bn used for deleverage
purposes; (iii) Cenco announced issuance of a local bond for US$400mn by Cencosud Shopping Centers (the newCo) which will be
used to pay intercompany debt; (iv) The sale of the credit card operation in Argentina, which would be one of the main divestment
targets and a good deleveraging move, is currently off the table due to the macro conditions in the country.
Strengths: (i) solid market position, strong brand portfolio & large scale of operations; (ii) business & geographic diversification; (iii)
sale of non-core assets strengthening the BS; (iv) resilient food business is the core (Supermarkets represent 60% of revenues),
Concerns: (i) IPO execution and valuation vs. risk of downgrade; (ii) challenging operating environment in Argentina, Brasil and
Colombia (21%, 14% and 8% of revenues, respectively); (iii) FX exposure; (iv) pressures from online commerce and intense
competition from local and foreign players demands continued investments, (v) chairman influence on day-to-day management
Table 48: Financials (CLP$bn) Table 49: Highlights

Cencosud (CLP$bn) 2015 2016 2017 2018 2019E 2020E 2021E FCF & Net Debt / EBITDA (CLPbn)
Net Revenues 10.991 10.338 10.457 9.646 9.705 10.453 11.005
% y/y 3% -6% 1% -8% 1% 8% 5%
EBITDA, Adjusted 684 766 703 642 667 790 894 4,7x 48 45
4,0x 180 29 68
% EBITDA margin 6,2% 7,4% 6,7% 6,7% 6,9% 7,6% 8,1%
EBITDA Lease Adjusted 871 959 904 838 863 985 1.090 3,7x 4,1x -73
EBITDA ex-IAS29 636 -214 3,1x
2,4x 2,0x
Interest Expense, Cash 259 284 297 237 215 187 186
Taxes 59 192 198 88 131 175 206
Working Capital -409 98 14 -216 -2 -13 -9 2015 2016 2017 2018 2019E 2020E 2021E
CFO (43) 388 221 102 319 415 493 Debt Profile (US$ mn)
Capex -172 -208 -192 -174 -251 -366 -448
FCF -214 180 29 -73 68 48 45 2.293
Dividends 81 227 142 128 86 102 140
FCF, after dividends -295 -48 -113 -201 -18 -54 -95 634 471 581 744 711
Cash 523 495 382 431 603 726 838 165 56 35
Total Debt, adj. 3.280 3.312 3.267 3.438 2.658 2.625 2.625
ST Debt 356 408 522 320 266 263 263 Cash '19 '20 '21 '22 '23 '24 '25 '26+
Net Debt, adj. 2.757 2.816 2.885 3.007 2.056 1.900 1.788 Debt Breakdown Exposure
Total Debt + Leases 5.345 5.067 4.991 4.795 3.658 3.625 3.625 Bonds 80% CLP+UF 73%
Banks 19% USD 21%
Total Adj Debt / EBITDA 4,8x 4,3x 4,6x 5,4x 4,0x 3,3x 2,9x Other 1% Other 6%
Adj Net Debt / EBITDA 4,0x 3,7x 4,1x 4,7x 3,1x 2,4x 2,0x
Interest Coverage 2,6x 2,7x 2,4x 2,7x 3,1x 4,2x 4,8x Shareholders
Lease Adj. Total Debt / EBITDA 6,1x 5,3x 5,5x 5,7x 4,2x 3,7x 3,3x 53% 24%
Horst Paulmann Others
Cash / ST Debt 1,5x 1,2x 0,7x 1,3x 2,3x 2,8x 3,2x
Chile Pension Funds 23%
FCF / Net Debt -7,8% 6,4% 1,0% -2,4% 3,3% 2,5% 2,5%

CENSUD 5 1/2 01/20/21 257 102,93 1,66 3,77 130 142 CENSUD 4 3/8 07/17/27 1.000 95,65 6,74 5,02 262 261
CENSUD 4 7/8 01/20/23 943 102,01 3,38 4,29 196 200 CENSUD 6 5/8 02/12/45 350 101,66 12,17 6,49 389 377
CENSUD 5.15 02/12/25 650 102,90 4,78 4,56 222 222
Handbook
InRetail Pharma (BB / Ba2 / BB+) & InRetail Shopping Malls (BB / BB+) Consumer
Our view: Both bonds issues by InRetail - the Pharma 23s (4.0% YTW, 164 z-spread) and Shopping Malls 28s (4.9% YTM, 260 z-
spread) - look relatively tight, especially when compared to higher rated peers like Cencosud and Falabella. Still, we believe that both
bonds will continue to perform given Peru scarcity value and specific drivers for each entity. The Pharma 23s will continue to capture
synergies from the Quicorp acquisition, expand margins and keep on deleveraging. The Retail 28’s are supported by the positive retail
momentum and opening of the new Puruchuco mall in 4Q19, as well as Capex normalization which will help FCF generation. We think
there’s room for a rating upgrade in both bonds.
Recent: i) InRetail delivered another strong set of results with sales up 58% y/y, boosted by the consolidation of Quicorp, while EBITDA
grew 47% y/y. Supermarkets’ sales grew 12% y/y. and EBITDA rose 7% y/y (-40bps margin). Shopping center sales grew 6% y/y,
driven by 7% y/y GLA growth, flattish occupancy rate of 96% and healthy tenant sales (SSS growth: 6%), with EBITDA up 3% y/y.
Pharma posted another strong quarter with SSS growth of 5%, once again delivering margin improvement. The Pharma segment
EBITDA, including the lower-margin MDM segment, rose 80bps y/y to 9.5% driven by a notable 2.8pp y/y EBITDA margin increase in
pharmacies. InRetail consolidated net leveraged closed the year at 3.5x, down from 4.3x pro-forma at the beginning of the year. The
company indicated a strong start to 2019.
Strengths: (i) ultimately both bonds share Intercorp risk (BBB- / Ba2 / BBB-); (ii) largest shopping center chain in Peru and largest
Pharmacies operator in Peru, (iii) large land bank, (iv) large and stable portfolio with good assets (19 malls with 626k m2 in GLA), (v)
stable cash flows, (vi) long-term debt profile, (vii) big economies of scale in the Pharma business with high purchasing power
Concerns: (i) exposure to FX risk (all revenues in PEN), partially mitigated by hedging strategy (US$750mn call spreads); (ii) intense
competition in the retail industry; (iii) execution risk of new mall openings; (iv) potential conflicts of interest within InRetail’s controlling
group (Interbank, Interseguro, Oeschle, Promart and/or Cineplanet), particularly on lease agreements in its shopping malls.

InRetail Corp (PENmn) 2015 2016 2017 2018 2019E 2020E 2021E FCF & Net Debt / EBITDA (US$ mn)
Net Revenues 6.798 7.273 7.810 12.243 13.752 15.023 16.216
% y/y 11% 7,0% 7,4% 56,8% 12,3% 9,2% 7,9% 5,3x
4,3x 4,0x 3,8x
EBITDA, Adjusted 722 793 825 1.183 1.428 1.601 1.746 3,5x 2,9x 2,6x
% EBITDA margin 10,6% 10,9% 10,6% 9,7% 10,4% 10,7% 10,8%
EBITDA Shopping Malls 269 287 294 311 328 390 401 1.430
1.147
% Margins 61,9% 62,7% 61,7% 61,7% 61,7% 61,8% 61,8% 628 756 622 856
546
EBITDA Pharma 203 241 231 575 722 786 855
% Margins 8,7% 9,2% 8,4% 7,8% 8,8% 9,0% 9,1% 2015 2016 2017 2018 2019E 2020E 2021E
Interest Expense, Cash (385) (206) (209) (478) (320) (318) (303) Debt Profile (US$ mn)
Taxes (68) (160) (187) (197) (337) (398) (454) 3,0
Working Capital 147 146 47 115 119 118 123 2,2
CFO 417 573 475 623 890 1.003 1.111 1,1 1,2 1,6 0,8
0,3 0,1 0,3
Capex (515) (517) (521) (3.417) (796) (579) (611)
FCF -98 56 -45 -2.794 94 424 500
Cash 325 432 599 671 563 658 761
Total Debt 2.670 2.659 2.704 5.069 4.967 4.837 4.744 Debt Breakdown Exposure
ST Debt 179 189 172 438 438 438 438 Bonds 58% USD 100%
Net Debt 2.344 2.227 2.105 4.398 4.404 4.180 3.983 Banks 37%
ND Pharma -17 1.722 Convertible 5%
ND Shopping Malls 1.060 878 1.626
Shareholders
Total Debt / EBITDA 3,7x 9,3x 9,2x 16,3x 15,1x 12,4x 11,8x 8,2% 3,9%
Dodge & Cox Brandes
Adj. Net Debt / EBITDA 3,2x 2,8x 2,6x 3,7x 3,1x 2,6x 2,3x
Boston Partners G.I. 2,6%
Interest Coverage 1,9x 3,8x 4,0x 2,5x 4,5x 5,0x 5,8x
Cash / ST Debt 1,8x 2,3x 3,5x 1,5x 1,3x 1,5x 1,7x
ND / EBITDA Pharma 3,0x
ND / EBITDA Shoping Malls 3,7x 3,0x 5,2x
FCF / Net Debt -4,2% 2,5% -2,2% -63,5% 2,1% 10,1% 12,5%

INRSHM '28 5,75 03-04-2028 350 Y No BB / - / BB+ 104,59 5,72 4,96 260 229
RETAIL '23 5,375 02-05-2023 400 Y No BB / Ba2 / BB+ 105,13 2,74 3,99 164 142
Handbook
Rede D’Or (BB- / BB) HealthCare

Our view: Rede D’Or 28s trading at 5.7% YTW & 331bps z-spread offer a very attractive spread over similarly rated peers (50bps
over Klabin 27s, 65bps over Ultrapar), considering its strong business position as the largest hospital operator in Brazil and strong
financial flexibility. While FCF has been negative on a combination of strong expansion, WK requirements and dividends, driving net
leverage to 2.9x as of Q4, the company has relevant flexibility to adjust capex and dividends to calibrate its capital structure. We expect
FCF will to remain negative as the company continues to expand, but credit metrics to return to the 2-2.5x level as EBITDA ramps up
(assuming dividend payouts fall to 50%). Hypothetically, an IPO would be a relevant upside trigger to the credit case.
Recent: (i) solid FY18: margins stable at 24.5% despite several acquisitions and renegotiations with health plan operators; stronger
expansion and dividends drove net leverage up to 2.9x; (ii) 5 hospital acquisitions since early 2018 and re-entry into the diagnostics
business for a total of R$1.4bn; (iii) diversifying service portfolio & increasing capillarity by adding ambulatory & oncology networks;
Strengths: (i) large business scale (42 hospitals & +6.4k beds) and strong brand drive above-average profitability – scale a key factor
in achieving fixed cost dilution & bargaining power with counterparties; (ii) successful track record of growth & integration of acquired
hospitals; (iii) strong financial flexibility, able to adjust capital structure discretionarily managing capex and dividends; comfortable debt
profile and liquidity; (iv) strong shareholder sponsorship, with strategic partners Carlyle and; (v) hospital bed supply deficit in Brazil -
resilient performance and ability to pass through cost increases even amid downturn of the Brazilian economy; (vi) strong relationship
with solid counterparties – large network, strategic location, quality & brand recognition attractive to health plan operators.
Concerns: (i) capital-intensive business and aggressive expansion (both organic and inorganic) – Rede D’Or expects to reach 9.7k
hospital beds by 2023, having acquired 26 hospitals / 4.1k beds since 2010; (ii) despite strong operating cash generation, expansion
and WK dynamics drive cash burn - high financial flexibility should ensure a well-balanced capital structure; (iii) shifting trends in
healthcare sector, amid migration from ‘pay per service’ to ‘pay per performance’ model; (iv) increasing competition since opening of
sector to private investment in 2015 (hard to replicate RDOR’s large scale/brand); (v) heavily regulated sector and legal risks; (vi)
majority of properties are leased, but for very long terms.

Rede D'Or (R$ mn) 2015 2016 2017 2018 2019E 2020E 2021E FCF & Net Debt / EBITDA (R$ bn)
Hospital Beds 4,400 5,000 5,224 6,106 7,320 7,920 8,520
% y/y 15.8% 13.6% 4.5% 16.9% 19.9% 8.2% 7.6% -0.7
-1.7 -0.5 -1.6 -1.3 -0.9
Net Revenues 6,452 7,912 9,417 10,915 13,527 16,145 18,113
% y/y 29.3% 22.6% 19.0% 15.9% 23.9% 19.4% 12.2% 2.9x 2.7x
2.0x 2.4x 2.3x
1.5x 1.5x
EBITDA, Adjusted 1,631 1,887 2,316 2,672 3,342 4,064 4,494
% EBITDA margin 25.3% 23.8% 24.6% 24.5% 24.7% 25.2% 24.8% -2.9
Taxes (78) (322) (340) (394) (636) (753) (815) 2015 2016 2017 2018 2019E 2020E 2021E
Non-Cash/Other 255 423 416 480 - - - Debt Profile (R$ bn)
Working Capital (1,107) (745) (1,128) (1,448) (785) (833) (737)
4.1 3.9
CFO 198 692 738 789 1,276 1,657 2,010 3.3
Capex -1,832 -961 -1,251 -2,236 -1,960 -1,706 -1,758 1.7
1.3 0.8
FCF (1,634) (270) (513) (1,447) (685) (49) 252 0.7 0.5
Dividends (104) (199) (1,108) (1,452) (591) (818) (968)
FCF, after dividends (1,738) (469) (1,620) (2,899) (1,275) (867) (716) Cash '19 '20 '21 '22 '23 '24 '25
Cash 1,986 2,741 3,261 4,057 3,057 2,940 3,225
Total Debt, adj. 4,416 5,523 7,863 12,210 12,486 13,236 14,236 Debt Breakdown Exposure
ST Debt 671 1,103 614 713 1,545 927 1,611 Debenture 55% BRL 99%
Net Debt, adj. 2,429 2,950 4,615 7,691 8,966 9,833 10,549 Bonds 16% USD 1%
Real Estate Receivables 13%
Total Adj Debt / EBITDA 2.7x 2.9x 3.4x 4.6x 3.7x 3.3x 3.2x
BNDES / IFC 8%
Adj Net Debt / EBITDA 1.5x 1.5x 2.0x 2.9x 2.7x 2.4x 2.3x
Net Debt+Leases / EBITDAR 2.2x 2.3x 2.7x 3.4x 3.1x 2.8x 2.7x Shareholders
Interest Coverage 3.5x 3.8x 4.0x 4.2x 5.2x 5.0x 4.8x Moll Family 57.4% GIC 25.9%
FCF / Net Debt -68.5% -19.3% -54.9% -62.8% -16.6% -9.7% -7.3% Carlyle Group 11.9% Other 4.8%

RDEDOR '28 4,95 17-01-2028 500 Y No BB- / - / BB 94,70 6,87 5,73 331 329
Handbook
Hidrovias (Ba3 / BB) Infrastructure

Our view: Hidrovias has been successfully ramping up its operations, driving stable & high margin cash flow generation and
deleverage. Although it’s balance sheet is still highly leveraged at 5x, we expect FCF generation to the tune of R$100-200mn/year, to
drive leverage down to low 3x by YE20. Hidrovias derives 1/3 of its EBTIDA from a LT iron ore take-or-pay contract with Vale, which
following the Brumadinho catastrophe raised investors’ concerns over the tail risk of a hypothetical stoppage of its operations in
Corumbá impacting the contract. Nonetheless, as dam inspections have not resulted in stoppages and as time passes by, this risk
perception should fade. Hidrovias bonds trading at 6.5% & 416bps of z-spread offer an interesting spread pickup to Rumo (+80),
Aegea (+60) making it an attractive play – we would see any volatility & sell-off in the bonds as an interesting entry point.
Recent: (i) Mitsui terminated its LT contract with HdB in Q2 (~16% of EBITDA), paying a compensation of R$388mn; (ii) company
continues to ramp-up northern operations, contracting the volumes lost with Mitsui; (ii) government is paving the final 80km of BR-
163, driving down freights costs and improving cost competitiveness/efficiency of the northern corridor; (iv) last shareholder
capitalization in Q4 (US$30mn); (iv) management studying additions of new routes (Porto Velho, western Matro Grosso, Itaquatiara,
Tietê) and products (clinker, fertilizers, etc); (v) strong 3Q18 results with 9M18 EBITDA at R$316mn and net leverage at 2.8x - 4.9x
ex Mitsui one-off and 4.0x ex cabotage business (bond covenants exclude bauxite business).
Strengths: (i) stable cash flow generation, with majority of EBITDA coming from long term contracts (+80%), with cost pass-through
for inflation and fuel prices + low counterparty risk; (ii) expect positive FCF generation on improving revenues, and lower capex levels;
(ii) strong shareholder support, although some PE funds are reaching maturity; (ii) potential sale of business to financial/strategic
partner or an IPO (under positive market conditions); (iii) favorable outlook for 2019 grain harvest in Brazil and improving
competitiveness of norther corridor; (iv) strong asset base (US$1.3bn), difficult to replicate (licensing); (v) low refinancing needs.
Concerns: (i) relatively small scale compared to BB peers and small track record (strong profitability so far); (ii) main clients Vale,
Cofco and Alunorte represent a substantial portion of its EBITDA (~70-80% of EBTIDA); (iii) loss of Mitsui contract, although co was
paid a large compensation and has been able to recontract volumes in spot market; (iv) high leverage, but declining as FCF remains
positive; (v) potential bid for toll road BR-163 and Ferrograo railway concessions, although we’d expect HdB to enter via partnerships;
(vi) Vale contract cancellation tail risk (fixed take or pay of US$44mn/year) – unlikely, but if it were to happen (e.g. regulator orders
halt of Vale’s tailing dam) could lead to legal battle (management comfortable with contract enforceability).

Hidrovias (R$ mn) 2015 2016 2017 9M18 2018E 2019E 2020E FCF & Net Debt / EBITDA (R$ bn)
Net Revenues 196 393 791 709 988 1,123 1,236 11.7x 0.2 0.3
0.1
% y/y - 100% 101% 28% 25% 14% 10% 0.0
-0.1
EBITDA, Adjusted 10 158 378 317 432 492 555
% EBITDA margin 5.2% 40.3% 47.8% 44.6% 43.8% 43.8% 44.9% 5.3x
Interest Expense, Cash (36) (187) (227) (114) (166) (207) (211) -0.4 4.3x 3.6x 2.9x
2.3x
Taxes - (1) (19) (9) (13) (18) (27) -0.8
Working Capital 54 36 157 (142) (108) (13) (15) 2015 2016 2017 2018E 2019E 2020E 2021E
CFO 28 6 288 51 145 254 301 Debt Profile (R$ bn) - As of 3Q18
Capex (803) (412) (347) (90) (115) (105) (85) 2,793
FCF (775) (407) (59) (39) 30 149 216
Capitalization / Dividends / Other 299 224 103 305 0 (73) (51) 982
Cash Burn (476) (183) 44 266 30 76 165 5 72 48 42 42 42
Total Assets 2,906 3,556 3,686 4,647 4,802 4,837 4,875
Cash 312 263 189 982 1,168 1,239 1,333 Cash '18 '19 '20 '21 '22 '23 '24+
Total Debt 1,567 2,120 2,202 3,014 3,014 3,009 2,937 Debt Breakdown Exposure
ST Debt 664 1,431 361 121 5 72 48 Bonds 80% USD 99%
Net Debt 1,255 1,857 2,013 2,032 1,846 1,769 1,604 Bauxite (BNDES) 19% BRL 1%
Equity 1,115 1,181 1,319 1,427 1,564 1,593 1,696 Other 2%
Total Debt / EBITDA - 13.4x 5.8x 7.2x 7.0x 6.1x 5.3x Shareholders
Net Debt / EBITDA - 11.7x 5.3x 4.9x 4.3x 3.6x 2.9x Patria 55.8% AimCo 10.1%
Interest Coverage 0.5x 1.0x 1.8x 2.3x 1.9x 2.4x 2.6x Temasek 18.2% BNDES 3.7%
FCF / Net Debt - -32.4% -3.2% -1.9% 1.5% 8.1% 12.2% Blackstone 9.3% IFC 2.8%

HIDRVS '25 5,95 24-01-2025 600 Y No - / Ba3 / BB 97,42 4,74 6,49 415 413
Handbook
Rumo (BB- / BB {Pos}) Infrastructure

Our view: Rumo bonds seem fairly priced having tightened substantially to 5.6% YTW and 333bps z-spread, narrowing the spread
over BB+ rated peers (55bps over Petrobras, 44bps over Klabin) as its credit metrics also converge closer to BB+ peers. Over the
past few years, Rumo’s credit profile has improved materially on the back of capacity increase, higher operating efficiency, equity
injections and liability management (as well as lower interest rates). We expected Rumo to become a strong FCF generator after
reaching a turning point in 2018, but a higher capex guidance announcement and investments for the recently acquired Norte Sul
Railway should curtail FCFs going forward. Still, we expect no material balance sheet pressure and expect net leverage to remain
close to 2x, as EBITDA ramps up meaningfully.
Recent: (i) Rumo won the bid for the Norte-Sul Railway (FNS) offering R$2.7bn concession fee (5% upfront, rest in 120 Q payments)
on top of minimum capex of R$2.7bn (real terms); (ii) new LT guidance: 10% volume CAGR in 2018-2023 reaching R$6.2-6.9bn
EBITDA in 2023 and R$13-15bn capex for 2019-2023. (iii) strong FY18 results with volumes and EBITDA up 13% and 15% y/y,
marking the transition to positive FCF generation as net leverage declines to 2.2x; (iv) R$2.9bn BNDES loan approved in Aug/2018;
(v) Malha Paulista renewal approved by ANTT, awaiting confirmation by TCU (Federal Audit Court); (vi) smooth CEO transition, with
Mr. João Abreu (former VP at Raízen & 18 years at Shell);
Strengths: (i) successful turnaround story on rising volumes, operating efficiency and commercial policy, transforming the company
into a strong, predictable cash flow powerhouse; (ii) key infrastructure player with strong market position (lack of competition, higher
efficiency vs. trucks, high barriers to entry) in main export corridors & ports in Brazil; (iii) constructive outlook for agricultural
commodities in 2019 (Agroconsult forecasts Brazilian crops to grow by 2% for soybean and 18% for corn), (iv) strong shareholder
support, corporate governance and rebalancing of capital structure (R$2.6bn capitalization in 2017), (v) comfortable debt profile.
Concerns: (i) higher investments ahead will curtail FCF generation, though not materially compromising Rumo’s leverage metrics -
on top of higher capex guidance (R$13-15bn for 2019-2023), FNS will likely consume, on average, R$300-400mn FCF annually over
the first 5 years; (ii) regulatory risk, concession liabilities and legal disputes; (iii) exposure to trends in the agricultural sector (80% of
transport volumes), partially mitigated by take-or-pay contract structure.

Rumo (R$ mn) 2015 2016 2017 2018 2019E 2020E 2021E FCF & Net Debt / EBITDA (R$ bn)
Transp. Volumes (RTK mn) 42,736 38,633 47,926 52,905 57,889 63,037 68,489 5.2x
% y/y -9.6% 24.1% 10.4% 9.4% 8.9% 8.6% 4.4x 0.5
0.0 0.2
Average Yield% y/y 0.0% 8.5% 3.8% 3.9% 3.3% 3.2% 3.1% 2.7x
0.0
Net Revenues 4,803 5,015 5,946 6,585 7,396 8,266 9,207
% y/y 4.4% 18.6% 10.7% 12.3% 11.8% 11.4% 2.2x 1.9x
1.6x 1.3x
EBITDA, Adjusted 1,918 2,029 2,757 3,242 3,716 4,262 5,030 -1.1
% EBITDA margin 39.9% 40.5% 46.4% 49.2% 50.2% 51.6% 54.6% -1.5 -1.4
Interest Expense, Cash (786) (1,134) (1,232) (725) (991) (1,025) (1,014) 2015 2016 2017 2018 2019E 2020E 2021E
Taxes - - - 2 (275) (375) (544) Debt Profile (R$ bn)
Non-Cash/Other (60) 24 140 329 - - - 3.0 3.4
Working Capital (355) (365) (586) (796) (106) (94) (113) 2.5
CFO 717 553 1,079 2,052 2,344 2,769 3,359
Capex -1,951 -1,926 -2,154 -2,020 -2,100 -2,000 -2,800 0.9 1.0 0.9 0.9 0.9
FCF (1,233) (1,373) (1,075) 32 244 769 559
Dividends (302) (2) 1 (3) (206) (281) (408)
Cash '19 '20 '21 '22 '23 '24 '25
FCF, after dividends (1,535) (1,374) (1,074) 29 38 487 150
Cash 581 1,177 3,330 2,985 3,098 3,445 3,366 Debt Breakdown Exposure
Total Debt, adj. 10,612 10,116 10,702 11,147 11,222 11,082 10,852 Bonds 48% BRL 100%
ST Debt 2,072 2,046 1,942 1,045 1,260 1,349 1,452 BNDES 34% USD 0%
Net Debt, adj. 10,031 8,939 7,371 7,270 7,232 6,745 6,595 Banks & Export Fin. 13%
Debentures 5%
Total Adj Debt / EBITDA 5.5x 5.0x 3.9x 3.2x 2.8x 2.4x 2.0x
Adj Net Debt / EBITDA 5.2x 4.4x 2.7x 2.2x 1.9x 1.6x 1.3x Shareholders
Interest Coverage 1.3x 1.2x 1.7x 2.6x 3.1x 3.4x 3.9x Cosan Logistica 28% Mgmt 0.1%
FCF / Net Debt - -13.7% -12.0% 0.4% 0.5% 6.7% 2.2% Arduini 4% Free Float 68%

RAILBZ '24 7,375 09-02-2024 750 Y No BB- / - / BB 107,12 1,67 5,18 271 260
RAILBZ '25 5,875 18-01-2025 500 Y No BB- / - / BB 100,68 4,05 5,71 338 330
Handbook
Cemex (BB / BB) Cement

Our view: Cemex’s deleverage story has been playing out progressively, as the company has been delivering on the promised debt
reductions. Throughout 2019 and 2020, we should see more on that front with asset sales driving deleverage and cost reductions
materializing in 2019 (~US$150mn savings). On the back of that, we believe the company could be on track to regaining IG in the
med-long term (with leverage moving to below 3.0x leverage and more asset sales on the way). Cemex bonds are already pricing-in
the deleverage trend, in our view, with CEMEX 25s trading at 4.9% YTM and 252bps z-spread, 26bps inside Nemak and 100bps
tighter than Elementia. Still, within Mexican corporates universe we see Cemex as one of the few safe heavens with almost 80% of
the revenues generated outside the country.
Recent: i) weak Q4 (as expected): Revenues up 1% y/y (+4% y/y on a like-for-like & FX-adjusted basis) to US$3.5bn, while EBITDA
fell 3% y/y (flat on a like-for-like and FX-adjusted basis) to US$604m as margins remained pressured by higher energy costs (17.5%
in 4Q18 vs. 18.3% in 4Q17). FCF was US$337m in Q4 & US$756m in 2018, enabling Cemex to initiate share repurchases, reduce
debt to US$10.1bn (vs. US$10.7bn in FY17), and to lower leverage to 3.8x; (ii) in line with its divestment plan (US$1.5-2bn by 2020),
Cemex has already announced 3 sales since February - Baltic and Nordic assets for EUR427mn, German aggregates and ready-mix
assets for EUR87mn, and Cimsa Cimento (white cement business), including its Bunol cement plant in Spain for US$180mn. In total,
since the announcement of the “A Stronger Cemex” plan in 2Q18 asset sales have reached US$750mn, 50% of the low end of its
divestment target range; (iii) Cemex Day highlights: focus remains on deleveraging (reduce total debt by US$3.5bn) and reaching 3.0x
ND/EBITDA by FY2020. (iv) Fitch upgraded the rating to B (stable outlook) from B- driven by the debt reductions made over the past
3 years (-US$5bn)
Strengths: (i) focus on deleverage and regaining IG status, with relevant divestment program + continuous efforts to profit from market
windows to reduce cost of debt; (ii) strong market position and professional management; (iii) regional diversification
Concerns: (i) still high leverage; (ii) FX volatility & mismatch of operating currencies and USD-denominated debt (92% of Debt and
~60% of revenues in HC) (iii) headwinds in Mexico with low domestic demand/infrastructure spending.

Cemex (US$mn) 2015 2016 2017 2018 2019E 2020E 2021E FCF & Net Debt / EBITDA (US$ mn)
Cement volume (mt) 66 67 69 69 70 71 74
% y/y -3,5% 1,0% 2,7% 1,3% 1,0% 1,8% 3,3% 5,3x
4,3x 4,0x 3,8x
Cement prices (US$/t) 109 104 105 108 110 112 113 3,5x 2,9x 2,6x
% y/y -3,8% -4,6% 0,9% 3,4% 1,0% 2,4% 1,1%
Net Revenues 14.127 13.651 13.651 14.383 14.684 15.431 16.133 1.430
1.147
EBITDA, Adjusted 2.636 2.790 2.571 2.558 2.600 2.787 3.016 628 756 622 856
546
% EBITDA margin 18,7% 20,4% 18,8% 17,8% 17,7% 18,1% 18,7%
Interest Expense, Cash -1.218 -1.130 -793 -623 -593 -578 -570 2015 1Q16 2Q16 3Q16 4Q16 2016 1Q17
Taxes -486 -299 -350 -227 -320 -320 -423
Non-Cash/Other 14 135 26 -279 -168 -168 -175 Debt Profile (US$ mn)
Working Capital 444 625 273 0 -47 -61 -152
3,0
CFO 1.391 2.121 1.726 1.429 1.472 1.661 1.696 2,2
Capex -763 -691 -579 -673 -850 -805 -1.150 1,1 1,2 1,6 0,8
FCF 628 1.430 1.147 756 622 856 546 0,3 0,1 0,3
Dividends 0 0 0 0 -150 -150 -215
FCF, after dividends 628 1.430 1.147 756 472 706 330
Cash 887 557 699 309 924 1.903 2.341
ST Debt 377 72 1.257 75 75 75 75 Bonds 58% USD 65%
Net Debt, adj. 14.000 12.073 10.202 9.644 9.032 8.180 7.743 Banks 37% EUR 27%
Convertible 5% Other 8%
Interest Coverage -3,6x 1,4x 3,0x 9,6x 9,1x 11,7x 24,9x Dodge & Cox 8,2% Brandes 3,9%
FCF / Net Debt 4,5% 11,8% 11,2% 7,8% 6,9% 10,5% 7,0% Boston Partners G.I. 2,6%

CEMEX 6 04/01/24 1.000 103,04 0,92 4,78 220 205 CEMEX 7 3/4 04/16/26 1.000 109,16 1,79 4,77 233 232
CEMEX 5.7 01/11/25 1.071 102,87 3,30 4,85 252 215 CEMEX 0 PERP 175 99,45 0,20 7,33 475 485
CEMEX 6 1/8 05/05/25 750 103,83 3,48 5,07 275 228 CEMEX 0 PERP 135 98,14 0,20 7,11 454 462
Handbook
Intercement (B+ / B) Cement

Our view: Intercement has partially tackled its capital structure issues, via the IPO of its Argentina subsidiary (Loma Negra, now 51%
owned) and the recent sale of its Portugal operations (pending). Nonetheless, local currency depreciation (especially in Argentina),
contracting cement demand & uncertainties looming over upcoming general elections in Argentina and a sluggish recovery in Brazil
(stronger recovery maybe in 2020) should drive still high leverage metrics and cash burn. Pro-forma for the Portugal sale, we expect
IC to repot still high net leverage metrics closer to 5x by YE19 (higher still if we were to proportionally consolidate its 51% stake in
Argentina). We see INCMBZ 24s trading at unattractive levels at 8.0% YTM (20bps wide to JSL 24s and 25bps inside GOL 25s),
given IC’s still unbalanced capital structure and a level which seems to already partially price in a turnaround of its Brazilian operations.
Recent: (i) Brazil cement data (SNIC) for Jan-Feb shows 5.4% demand growth in Jan-Feb, with industry participants forecasting 3%
growth for 2019. Cement demand decline almost 30% since 2014 and was down 1.1% in 2018 (impacted by the trucker strike); (ii)
Argentina cement demand (AFCP) down -16% in Q4 and -8.8% in Jan-Feb; (iii) postponement of preferred dividends in in FY17 and
FY18; (iv) net leverage up to 5.2x in 9M18 (vs. 4.3x in FY17) on a combination of currency depreciation impatign EBTIDA and EUR
270mn of cash burn (EUR 179mn in WK consumption).
Strengths: (i) successful IPO of Loma Negra late 2017 raised EUR923mn (of which EUR550mn used to pay down debt); (ii) Oct/2018:
Sale of Portugal assets to greatly increase liquidity and leave company in comfortable position to tackle debt maturities until 2020
(media report indicate valuation for EUR 700mn); (iii) high quality underlying assets providing asset coverage, (iv) geographic
diversification, with nationwide presence in Brazil and dominant market share in Argentina (better price pass through conditions); (v)
long-term upside of Brazilian economy & cement demand recovery (may take years); (vi) Company undertook strong cost cut
measures over past couple of years, which could support better EBTIDA in Brazil.
Concerns: (i) weak (improving) corporate governance standards; (ii) Brazil results remain weak, with high idle capacity in the industry
(~50%), but there are signs of a bottoming out and recovery of demand; (iii) relevant contraction in cement demand in Argentina (2/3
of LTM EBTIDA), with high inflation & strong currency depreciation reduces expected EBITDA contribution; (iii) currency mismatch in
funding (67% of debt in USD & EUR) vs. local currency operations (strong FX depreciation in past); (iv) very high leverage (5.2x as of
3Q18) and limited FCF prospects – leverage to improve after Portugal sale proceeds, but partly offset by further ARS depreciation.

Intercement (EUR mn) 2015 2016 2017 9M18 2018E 2019E 2020E FCF & Net Debt / EBITDA (EUR bn)
Cement Sales (mn tons) 28.5 24.3 24.3 17.9 23.7 20.3 21.1 0.12
% YoY -6.6% -14.7% -0.1% -0.2% -2.5% -14.4% 4.1% 7.5x
-0.06 0.02
Net Revenues 2,493 1,843 1,885 1,239 1,631 1,355 1,402 5.9x
4.9x 4.5x 4.0x
% y/y -4% -26% 2% -12% -13% -17% 3%
Net Income (44) (655) (431) (103) (159) (115) 121 4.3x 4.3x -0.12
EBITDA, Adjusted 518 346 358 227 305 253 285 -0.18 -0.16
% EBITDA margin 20.8% 18.8% 19.0% 18.3% 18.7% 18.7% 20.3% -0.25
Interest Expense, Cash (222) (243) (225) (142) (196) (156) (133) 2015 2016 2017 2018E 2019E 2020E 2021E
Taxes (47) (38) (51) (28) (38) (50) (40) Debt Profile (EUR bn) - As of 3Q18
Working Capital 12 (92) 74 (179) (124) (9) (8)
CFO 229 (61) 77 (138) (69) 37 103 0.63
Capex (109) (117) (133) (136) (181) (197) (219) 0.33 0.30 0.33 0.34
0.26
FCF 120 (178) (56) (274) (250) (160) (117)
M&A / Other 60 87 940 4 4 600 0 0.01
Dividends (142) (54) 0 0 0 0 0
Cash ST '19 '20 '21 '22 '23+
FCF, after dividends + M&A 38 (145) 884 (270) (246) 440 (117)
Cash 791 591 1,200 262 254 541 231 Debt Breakdown Exposure
Total Debt 3,291 3,425 2,713 1,928 1,931 1,776 1,524 Bilateral Loans 53% EUR 67%
ST Debt 209 431 631 333 320 400 385 Bonds 24% BRL 24%
Net Debt, adjusted 2,243 2,609 1,525 1,780 1,792 1,234 1,293 Debentures 21% ARS 5%
Other 2% PYG/EGP 4%
Interest Coverage 2.2x 1.3x 1.3x 6.6x 1.9x 1.6x 2.1x Camargo Correa 91.0% Others 9.0%
FCF / Net Debt - -6.4% 33.9% -17.7% -16.2% 24.6% -9.5%

INCMBZ '24 5,75 17-07-2024 667 Y No B+ / - / B 90,56 4,33 7,98 566 569
Handbook
Aegea (Ba1 / BB {Neg}) Utilities

Our view: Aegea 24s offer an attractive carry at 5.9% YTW & 355bps z-spread, in our view, trading 15bps over Rumo and flat to BRF.
While the company’s leverage is slightly higher vs. peers and we expect the company to continue burning cash as it expands, the
underlying business is very stable (predictable demand, inflation-linked tariffs) and the company has been able to effectively manage
its capital structure, by timing investments and via shareholder support from its strategic partners.
Recent: (i) Q4: good results, with EBITDA up 22% q/q R$255mn; (ii) R$577mn capitalization by GIC & IFC during 2018; (iii) acquisition
of Manaus concession for R$830mn back in early 2018 - half on signing, R$300mn in Jan/2019 and remainder in Jan/2020; (iv) recent
revision of minimum volume tariff in Guariroba has impacted its results (EBITDA down 8% y/y), but economic rebalancing will offset
impact over time (via higher tariff readjustments over next 3 years).
Strengths: (i) favorable concession model and low business risk – long term (average +30 yrs), inflation-linked tariff readjustments
(no X-factor), straightforward targets (i.e. water & sewage coverage) and predictable/inelastic demand; (ii) high margin business, with
stable & predictable cash flows; (iii) strong shareholder support from strategic partners GIF & IFC; (iv) solid track record of turning
concessions around with strong dividend stream from mature concessions (Guariroba and Prolagos) supporting investments in newer
concessions; (v) improving debt profile and good access to debt capital markets, bonds fully hedged with 3.5x net leverage covenant;
(vi) potential IPO candi date as sector opens up to private investment, with new sector regulation under discussion.
Concerns: (i) capital intensive business and aggressive expansion (via acquisition and concession bids) drive cash burn, further
boosted by large dividend payouts – shareholder agreement and covenants limits pro-forma net leverage to 3.5x; (ii) structural
subordination of bonds at holdco; (iii) hydrological risk, mitigated by broad geographic diversification; (iv) regulatory & political
interference risk, diluted by diversification under different regulatory agencies and good track record of concession agreement
enforceability; (v) legal / news flow risk.

Aegea (R$ mn) 2015 2016 2017 2018 2019E 2020E 2021E FCF & Net Debt / EBITDA (R$ bn)
# Households, Water ('000) 789 866 1,232 1,678 1,735 1,795 1,852
# Households, Sewage ('000) 577 620 936 1,056 1,154 1,266 1,388 3.2x
3.0x
Water Volumes billed, mn m3 130 145 178 249 283 290 299
Sewage Volume billed, mn m3 74 78 107 127 149 164 181 -0.4 3.8x 3.4x 3.3x 3.2x
-0.4 3.0x
Net Revenues, ex Construction 253 278 343 2,061 2,259 2,459 2,672 -0.4
-0.6 -0.6
EBITDA, Adjusted 403 462 675 810 1,066 1,250 1,394
-0.8 -0.8
% EBITDA margin 159.0% 166.2% 196.6% 39.3% 47.2% 50.8% 52.2%
Interest Expense, Cash (131) (210) (236) (111) (271) (372) (447) 2015 2016 2017 2018 2019E 2020E 2021E
Taxes (72) (100) (100) (141) (193) (211) (225) Debt Profile (R$ bn)
Working Capital (102) (70) (261) (157) (37) (14) (11) 2.40
CFO 108 117 133 474 564 652 711
1.38
Capex (342) (508) (527) (1,145) (1,000) (832) (800)
FCF (234) (391) (395) (671) (436) (180) (89) 0.35 0.38 0.43 0.44
0.27
Dividends (124) (37) (161) (152) (375) (410) (328)
FCF, after dividends (358) (428) (555) (823) (811) (590) (416)
Cash '19 '20 '21 '22 '23 '24+
Capitalization 3 124 15 577 0 0 0
Cash 297 325 1,072 1,380 965 852 806 Debt Breakdown Exposure
Total Debt 1,601 1,773 3,102 4,209 4,605 5,083 5,453 Debentures 35% BRL 100%
ST Debt 383 223 90 354 354 354 354 Bonds 37% USD 0%
Net Debt, adj. 1,205 1,463 2,032 3,113 3,624 4,114 4,531 BNDES & Caixa 24%
Proparco/IFC 3%
Interest Coverage 3.2x 2.7x 2.9x 2.6x 3.9x 3.4x 3.1x Equipav 58.7% IFC 13.7%
FCF / Net Debt - -35.5% -37.9% -40.5% -26.0% -16.3% -10.1% GIC 27.6%

AEGEBZ '24 5,75 10-10-2024 400 Y No - / Ba2 / BB 99,38 4,64 5,88 355 349
Handbook
Cometa / Saavi Energia (Baa3 / BBB) Utilities

Our view: We see COMENG 35 bonds at 6.4% YTM and 400bps z-spread offering an attractive carry (having recovered most of the
recent underperformance already), now 186ps wide to CFELEC 27s. Despite the current negative environment in Mexico, we see
Saavi as one of our selective top picks. Saavi has fully dollarized revenues, with +80% of its capacity contracted (we see low risk of
contract revision/cancellations), low dependence on Pemex (only 1 plant fully dependent, equivalent to 11% of capacity, although it
has diesel generation flexibility) and a solid client base (benefits from exposure to US clients and suppliers).
Recent: (i) robust Q4 figures as a very tight merchant market in both Mexico and California and high spot prices translated into strong
EBITDA figures (US$193mn at year-end +10% y/y). Cash flow available for debt servicing stood at US$157mn (2.3x coverage ratio)
and net debt was US$771mn, with net leverage at 4.0x;
Strengths: (i) close to 90% of its capacity fully contracted; (ii) Stable and predictable Cash Flow generation; (iii) flexibility in supply
sources (access to gas supply from the US); (iv) connected to the US grid, supplying to US clients and mitigating Mexican risk; (v)
tight merchant market in both Mexico and California. (vi) management highlighted they see no risk of a contract re-negotiation with
CFE (main customer, 57% of generation capacity contracts) and have an outstanding track record of invoice payments; (vii)
opportunities created by delays in new generation capacity coming online, as spot prices could remain at higher levels for longer
(prices in 2018 were around US$90MW)
Concerns: (i) risk of contract re-negotiation given AMLO track record since taking office; (ii) main contracts ending before the maturity
of the bond (key renewal years will be 2027 and 2028); (iii) main client is CFE (57%), posting sovereign risk.

2018 1000
Saavi (US$mn) 2015 2016 2017 4Q18 2018
May-June
Revenue 429,1 486,1 540,6 185,7 503,7 663,2 900
M ain period
Adj. EBITDA 146,0 138,1 175,2 40,9 139,1 192,7 for contract
800
% margin 34,0% 28,4% 32,4% 22,0% 27,6% 29,1% renewals
700
Interest Expense 23,0 27,9 27,9 14,5 50,5
Capex 15,7 7,2 7,0 0,0 0,9 600
Taxes 48,9 12,2 17,0 2,4 9,6

USDmn
500
Op. CF 84,3 43,3 93,1 -11,7 92,7
CFADS* 115,1 92,4 139,6 11,5 133,5 157,2 400
Debt 413,4 363,6 325,4 844,0 844,0 844,0 300

Short Term Debt 51,5 43,8 75,8 0,0 0,0 0,0
Net Debt 340,5 312,0 307,5 766,9 766,9 766,9 200
Adj. Net Debt 285,2 273,5 267,8 766,9 766,9 766,9

100
Equity 445,1 371,4 337,3 370,1 370,1 370,1
0
Total Cash and Equivalents 128,2 90,1 57,6 77,1 77,1 77,1
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
EBITDA / Int Exp 6,3x 4,9x 6,3x 2,8x 2,8x Outstanding Principal Amortization
EBITDA-Capex / Int Exp 7,0x 5,2x 6,5x 2,8x 2,8x

Net Debt / EBITDA 2,0x 2,0x 1,5x 4,0x 4,0x
Cash / ST Debt 1,4x 1,2x 0,2x
Source: BTG Pactual / Company Data *Cash Flow Available for Debt Service Source: BTG Pactual / Company Data

COMENG '35 6,375 24-04-2035 849 Y No - / Baa3 / BBB 99,71 6,87 6,42 400 393
Handbook
Entel (BBB- {Neg} / Baa3 / BBB-) Telecom

Our view: Negative EBITDA in Peru since Entel entered the country in 2013 combined with high Capex needs have translated into
negative FCF in the past five years and higher net leverage metrics (3.6x in 4Q18). Going forward, we expect Entel’s Peruvian
operations to drive EBITDA growth, while a tough competitive environment in Chile will result in muted top line growth for Entel and
could pressure margins. However, we now see Entel’s free cash flow possibly approaching a turning point in late 2019 (still negative
for the FY) and driving positive FCFs thereafter on lower operating losses in Peru. Entel bonds which had been pricing in some
downgrade risk, have tightened to what we deem fair levels now, apparently pricing in the Peruvian turnaround and consequent
reduction of downgrade risk. Entel 24s now trade only 36bps over CMPC (vs. +100bps over in late 2018).
Recent: (i) In March, Fitch assigned a negative outlook to Entel´s BBB- rating, due to weak operating cash flow performance and
resulting higher leverage. Failure to lower leverage close to 3.5x (measured as total adj. debt to EBITDAR, currently at 4.2x) during
the next year could lead to a downgrade; (ii) Q4 revenues were flat y/y, but EBITDA surprised positively, reaching CLP131bn (+13%
y/y), driven by record high margins on the Chilean operation (34.6%, +211 bps y/y) and the break-even of the Peruvian operation. Net
leverage improved marginally to 3.6x (from 3.8 in Q3).
Strengths: (i) largest wireless carrier in Chile with 32% market share (vs. 31% for Telefonica Movistar, 24% for AMX Claro and 12%
for newcomer WOM) and third in Peru with a 19% market share (Telefonica 34% and AMX’s Claro 32%); (ii) high-quality subscriber
base and state-of-the-art technology; (iii) strong controlling shareholders led by a group of well-known local business conglomerates.
Concerns: (i) softer growth and stronger competition in Chile expected to impact future margins, with newcomers (WOM, Virgin, VTR)
gaining share mainly in the postpaid segment (WOM went from 3% to 12% share in two years). More aggressive pricing could happen
over the next year as Chilean regulator massively reduced interconnection costs, benefitting smaller operators (net payers); (ii)
Execution risk of its expansion into Peru and uncertainties regarding price behavior from competitors; (iii) geographic concentration in
two countries; (iv) small scale relative to global industry peers.
Table 75: Financials (CLP$ mn) Table 76: Highlights

Entel (CLP$ mn) 2015 2016 2017 2018 2019E 2020E 2021E FCF & Net Debt / EBITDA (CLP$ bn)
Net Revenues 1.793 1.887 1.955 1.964 2.043 2.099 2.146 3,6x 3,2x 3,3x 3,6x 49
Chile 1.554 1.550 1.509 1.471 1.497 1.519 1.541 2,8x
Peru 233 337 446 493 546 580 605 3,2x
EBITDA 357 425 437 457 546 636 685 -27 2,5x
-86
% EBITDA margin 19,9% 22,5% 22,4% 23,2% 26,7% 30,3% 31,9%
Chile 526 546 513 481 509 532 551 -242 -285
-268
Peru -169 -121 -76 -22 36 105 134 -331
Interest Expense, Cash -59 -76 -75 -76 -85 -85 -82 2015 2016 2017 2018 2019E 2020E 2021E
Taxes -48 -25 -26 -73 -29 -48 -55 Debt Profile (CLP$ bn)
Working Capital -49 -137 -71 -72 -18 -22 -7 510
444 440
CFO 201 187 266 236 413 481 540 376 400
Capex -523 -454 -497 -508 -499 -450 -411 278
177 151
FCF -322 -268 -231 -272 -86 32 129
Dividends -9 0 -10 -13 0 -59 -80 2 2 0
FCF, after dividends -331 -268 -242 -285 -86 -27 49
Cash '19 '20 '21 '22 '23 '24 '25 '26 '27 '35
Cash 408 228 184 177 92 65 114
ST Debt 22 25 37 21 21 21 21 HC Bonds 69% USD 69%
Net Debt, adj. 1.268 1.374 1.443 1.638 1.724 1.751 1.701 LC Bonds 11% LC 31%
Total Adj Debt / EBITDA 4,7x 3,8x 3,7x 4,0x 3,3x 2,9x 2,7x Bank Loans 20%
Interest Coverage 6,1x 5,6x 5,8x 6,0x 6,4x 7,5x 8,4x Altel Inversiones 55% Others 27%
FCF / Net Debt -26,1% -19,5% -16,7% -17,4% -5,0% -1,5% 2,9% Pension Funds 18%

ENTEL '24 4,875 30-10-2024 1.000 N No BBB- / Baa3 / BBB- 102,16 3,95 4,34 198 205
ENTEL '26 4,75 01-08-2026 800 Y No BBB- / Baa3 / BBB- 101,36 5,62 4,51 215 214
Handbook
Oi (B / B-) Telecom
Our view: Following its massive debt restructuring and R$4bn capital increase, Oi is ramping up investments (to R$7bn/year, mainly
in FTTH broadband services) to revert its declining top line trend, which will take time and drive negative FCFs for years. W e expect
revenues to grow only in 2021, with average negative FCF of ~R$2bn over the next 3 years. Nonetheless, Oi has several options to
bridge the cash flow gap (i.e. asset sales, Telecom reform). Longer term, Oi remains a strategic asset and potential M&A target to
newcomers or current operators. While the standalone credit case for Oi looks challenging, we see relevant upside & spread tightening
potential in Oi 2025s (8.9% YTM) in case M&A materializes (many possible forms) and as optionalities materialize.
Bridging the cash flow gap: i) 25% stake in Unitel (~US$1bn, likely a negotiated solution), ii) approval of the Telecom Reform
(PLC79), driving cash savings of ~R$1bn/year and unlocking ~R$1.0-2.0bn real estate asset sales, iii) non-core asset sales of ~R$1.0-
1.5bn (fiber networks in SP, towers, data centers), and iv) a favorable Superior Court (STJ) ruling on R$2.2bn PIS/Cofins tax credits,
driving cash savings of R$900mn/year for 2.5 years.
Telecom Reform: transformational with savings deriving from: i) end of bi-annual 2% concession fee (~R$150mn/year), ii) reduction
of mandatory investment in public phones (~R$300mn); iii) easier requirements on installation & repair of new & existing lines
(~R$300mn), iv) better use of real estate assets (at least ~R$1.0-2.0), and v) tax savings of up to R$400mn/year. Yet, the most
important factor is that the new legislation could spur M&A in the sector. We expect the bill to be voted in 1H19, as it counts on broad
support from the government. Nonetheless, the legislation would still have to be regulated by ANATEL (little-to-no impact in 2019),
which will also estimate the economic value of the concessions assets (to be converted into future investments in networks).
The M&A endgame: M&A remains the most attractive alternative for shareholders, which could take several forms: i) a consolidation
with TIM (either TIM acquiring Oi or a strategic investor capitalizing Oi to acquire TIM), ii) Oi could be acquired by a newcomer, and
iii) Oi could sell its mobile operations and continue to operate as a much less leveraged fixed-line/connectivity operator. We believe
Oi’s mobile operations could be worth R$15-20bn (at 7-8x multiple, mobile revenues of R$8bn and estimated EBTIDA of R$2.5bn).
Recent & upcoming: (i) weak Q4 (as expected) with revenues down 8% y/y to R$5.3bn, while EBITDA was down 6% y/y to R$1.2bn;
(ii) shareholder meeting on April 26th to vote on long term compensation plan for top management & BoD, which should create much
stronger incentives to undertake M&A; (iii) In Feb, Oi won an arbitration against Unitel’s shareholders, reinstating its political rights (2
out of 5 BoD seats + election of new CEO), establishing US$750mn compensation and unlocking US$750mn in owed dividends.
Concerns: (i) strong cash burn and weak operating performance short term; (ii) execution risk of capex & turnaround plan; (iii) highly
competitive industry + underinvestment & declining market share in past few years; (iv) limited access do bank debt & capital markets.

Oi (R$ mn) 2015 2016 2017 2018 2019E 2020E 2021E FCF & Net Debt / EBITDA (R$ bn)
Net Revenues 27,354 26,323 23,787 22,075 21,187 21,194 21,491
1.8
% y/y -4% -4% -10% -7% -4% 0% 1% 7.6x
Net Income (6,416) (5,619) (3,422) 29,806 (2,072) (1,882) (1,896) 5.9x
EBITDA, Recurring 7,605 6,867 6,243 5,732 5,677 5,987 6,461 -1.1 -1.8 -1.4
5.9x -3.0
% EBITDA margin 27.8% 26.1% 26.2% 26.0% 26.8% 28.2% 30.1%
Interest Expense, Cash (8,404) (3,690) (7,755) (978) (921) (275) (412) -4.3 2.1x 2.2x 2.6x 2.9x
Taxes (715) (2,999) (964) 3,275 (300) - - -6.0
Working Capital 7,545 428 2,148 (2,977) (490) (489) (428) 2015 2016 2017 2018 2019E 2020E 2021E
CFO 6,031 607 (328) 5,052 3,966 5,224 5,621 Debt Breakdown (R$ bn) Exposure
Capex (4,265) (4,902) (5,688) (6,112) (7,008) (7,016) (6,982) Bonds (USD) 7.1 BRL 46%
FCF 1,765 (4,295) (6,016) (1,060) (3,042) (1,792) (1,361) Non-Qualified Bondh. 0.3 USD 52%
Capitalization / Asset Sales 0 0 0 0 3,900 0 0 BNDES 3.6 EUR 1%
Cash Gap 1,765 (4,295) (6,016) (1,060) 858 (1,792) (1,361) 8.7
Local Currency
Cash 16,700 7,680 6,884 4,587 5,445 3,653 2,292 Foreign Currency 6.4
Total Debt (NPV as of 2018)** 61,761 48,086 54,515 16,450 17,668 19,138 20,815 General Offer 4.3
Net Debt (NPV as of 2018)** 45,061 40,406 47,631 11,863 12,223 15,485 18,523 Debt, Face Value 30.4
Total Debt / EBITDA 8.1x 7.0x 8.7x 2.9x 3.1x 3.2x 3.2x Oi's NPV Adjustment - 13.9
Net Debt / EBITDA 5.9x 5.9x 7.6x 2.1x 2.2x 2.6x 2.9x NPV Debt, reported 16.5

OIBRBZ '25 10 27-07-2025 1.656 N No B / - / B- 105,22 4,57 8,89 #N/A N/A 656
Handbook
Avianca (B / B) Airlines
Our view: Avianca seems to have taken a new path towards capacity rationalization and focus on profitability which we acknowledge
as positive. Some of the governance issues, which have been a key concern to investors, seem to have started to be addressed.
United Airlines increased the presence in Avianca’s board of directors, with 1 observer and 1 voting seat. Avianca intends to refinance
its 2020 bonds with an issuance occurring in a tight window (possibly between end of April and early May). We believe avianca has a
good shot at refinancing its 2020 bonds, given the dearth of new issuances so far this year and a more credible deleverage strategy
& governance structure. Nonetheless, Avianca may have to settle for a high refinancing cost, which could pose an interesting
opportunity for bond investors.
Recent: (i) AVH posted better than expected Q (albeit very polluted by several adjustments), with revenues up 15% y/y to US$1.29bn,
adj. EBIT (excluding a non-cash fleet impairment of US$39mn as it intends to retire its Embraer fleet) of US$106mn (-37% y/y), yielding
an 8.2% adj. margin (-700bps y/y). Net leverage improved marginally to a still very high adj. net debt/EBITDAR of 6.4x (vs. 7.0x in Q3);
(ii) Avianca’s 2019 outlook calls for an EBIT margin between 7% and 9% (vs. 2018 adj. margin of 7%). Most importantly, as part of its
new strategy to strengthen the company’s profitability and reduce leverage, AVH is now guiding to a conservative capacity outlook for
2019, with an increase in the range of 0-2% and a load factor of 81-83% (vs. 82% in 2018).
Strengths: (i) leader in high growth markets, such as Colombia and Central America; (ii) lowest exposure to FX fluctuations compared
to competitors across Latin America; iii) new strategy of capacity rationalization and focus on profitability and deleverage; (iv) JV with
Copa and United Airlines; (v) position of United in the board - could increase with collateralized loan by 51% of Synergy stake,
Kingsland put option on their shares, by 2023, which will likely end in the hands of United, and a United 70mn shares call option.
Concerns: (i) exposure to currency and fuel price volatility; (ii) failure to extend debt maturity (refinance the 2020 bond within 2019);
(iii) very high leverage, weak liquidity (cash at 5.7% of LTM revenues) end relevant refinancing needs; (iv) risk of increase in competition
from low cost-carriers. (v) FX mismatch (although fairly balanced revenue & cost exposure).

Avianca (US$ mn) 2015 2016 2017 2018 2019E 2020E 2021E FCF & Net Debt / EBITDA (R$ bn)
ASK, y/y -23,6% 5,9% 2,7% 8,7% 1,9% 2,2% 3,6%
RASK, y/y 21,3% -10,4% 4,5% 1,3% 2,4% 0,3% 3,6% -52 -23 -91 -149
CASK, y/y 22,7% -11,6% 4,1% 3,3% -0,3% -0,7% 3,3% 6,9x 6,4x
6,2x 6,1x 6,0x 6,0x 5,7x
Load Factor % 79,7% 81,1% 83,1% 83,1% 81,0% 82,2% 82,2%
Net Revenues 4.361 4.138 4.442 4.891 5.101 5.227 5.610 -261 -251
% y/y
EBIT (ex one-off & IFRS16) 219 258 294 232 367 424 470 -419
% EBIT margin 5,0% 6,2% 6,6% 4,7% 7,2% 8,1% 8,4% 2015 2016 2017 2018 2019E 2020E 2021E
EBITDAR, Adjusted 767 843 886 889 957 976 1.052
% EBITDAR margin 17,6% 20,4% 19,9% 18,2% 18,7% 18,7% 18,8% Debt Profile (R$ bn)
Aircraft Rent (318) (314) (279) (268) (267) (265) (265)
Interest Expense, Cash (169) (173) (183) (212) (185) (188) (204) 2.553
Taxes (31) (34) (20) (20) (37) (48) (55)
Working Capital 32 (33) (5) 50 49 (16) 11 748 559
CFO 281 289 398 439 517 459 541 278
Capex -700 -550 -450 -690 -540 -550 -690
FCF -419 -261 -52 -251 -23 -91 -149 Cash '19 '20 '29
Cash 485 381 514 278 112 325 702 Financial Debt Breakdown Exposure
Total Debt 3.591 3.413 3.948 4.128 4.003 4.333 4.885 Bonds 14% USD 92%
Capialized Leases 2.223 2.201 1.951 1.874 1.867 1.852 1.852 Term Loan 83% Other 8%
Net Debt + Leases 5.329 5.233 5.385 5.724 5.759 5.861 6.035
Total Debt / EBITDAR 4,7x 4,1x 4,5x 4,6x 4,2x 4,4x 4,6x Shareholders
Adj. Net Debt / EBITDAR 6,9x 6,2x 6,1x 6,4x 6,0x 6,0x 5,7x Synergy 51,5% Others 34,0%
Interest Coverage 4,5x 4,9x 4,8x 4,2x 5,2x 5,2x 5,2x Kingsland 14,5%
FCF / Net Debt -68,6% -4,9% -1,0% -4,7% -0,4% -1,6% -2,6%

PFAVHC '20 8,375 10-05-2020 550 Y No B- / - / B- 99,90 0,97 8,46 590 602
Handbook
Azul (B+ / Ba3) Airlines

Our view: We have a positive view on Azul on the back of its competitive advantages stemming from its well-developed network,
where the company faces less competition, with monopolies in some routes. This allows the company greater pricing flexibility and to
deliver the highest operating margin amongst Brazilian peers. On top of that, we appreciate management’s track record and Azul’s
sound governance. With the Avianca acquisition (and even without it) Azul’s capacity growth is moving towards higher competitive
routes, which could be a concern. Nonetheless, Azul stands to benefit strongly from the recovery of the Brazilian economy (high beta)
and a more disciplined competitive landscape in the domestic market. Azul 202s bonds (6.7% YTM and 435bps z-spread) have
tightened to a fair level at this point, trading 70bps over LATAM 24’s. Like GOL the bonds trade with a high beta to BRL.
Recent: i) Azul announced a non-binding proposal to acquire some of Avianca Brasil’s operating assets (a UPI that would include its
operating certificate, 70 slot pairs and 30 A320 aircraft) for up to USD105mn, that was rejected by creditors. To acquire Avianca’s slots
Azul will have to take part in the upcoming auction; ii) Azul posted good 4Q18 results with EBIT at R$283mn, with margin down 250bps
y/y to 11.4%, driven by 17.3% devaluation of the Brazilian real and the 37.2% increase in fuel price. Operating margin was 8.8% for
the full year adjusting for non-recurring items. EBITDAR was up 14.5% to R$763mn (30.7% margin, flat y/y). On a FY basis, adjusted
EBITDAR increased 13.5% reaching R$ 2.6bn. RASK increased 2.7% y/y in 4Q18 and 7.6% y/y in 2018. Passenger traffic grew 14.5%
on a capacity increase of 14.1% resulting in a load factor of 83.0%, 0.3 percentage points higher than in 4Q17. CASK ex-fuel decreased
8.1% despite the 17.3% depreciation of the Brazilian real. For the full year, CASK ex-fuel decreased 2.4%. Azul’s leverage ratio
calculated as adjusted net debt to EBITDAR stood at 4.3x in 4Q18. The company finished the year with a cash position of R$2.9bn.
Strengths: (i) exposure to routes with less competition, able to charge higher premium, ii) capacity rationalization in Brazilian market
with companies growing capacity at or below demand, and strengthened by the Avianca Brasil bankruptcy (iii) hedging policy mitigates
FX volatility and provides low BS exposure (HC assets cover ~5x HC liabilities), (iv) good management.
Concerns: (i) increasing exposure to higher competition routes, (ii) risk of higher committed capex with the Avianca Brasil acquisition,
(iii) expected volatility with pension reform impacting FX

Azul (R$ mn) 2016 2017 2018 2019E 2020E 2021E 2022E FCF & Net Debt / EBITDA (R$ bn)
Domestic ASK, y/y -3,3% 5,3% 8,0% 16,0% 5,0% 5,0% 5,0% 2,4
5,8x 1,8
RASK, y/y 9,2% 5,6% 1,9% 4,3% 5,8% 5,0% 5,0% 4,3x
3,9x 1,3
CASK, y/y 0,8% -1,1% 4,5% -0,7% 2,1% 1,8% 1,5% 0,9
Load Factor % 79,7% 82,1% 82,3% 81,8% 82,0% 82,0% 82,0% -0,1
Net Revenues 6.670 7.790 9.205 11.231 12.479 13.758 15.168 3,4x 2,7x 2,2x
% y/y 6,6% 16,8% 18,2% 22,0% 11,1% 10,3% 10,3% 1,7x
-0,7
EBIT (ex one-off & IFRS16) 344 865 809 1.482 2.029 2.586 3.263 -1,3
% EBIT margin 5,2% 11,1% 8,8% 13,2% 16,3% 18,8% 21,5% 2016 2017 2018 2019E 2020E 2021E 2022E
EBITDAR, Adjusted 1.806 2.347 2.644 3.513 4.194 4.862 5.653
Aircraft Rent (1.161) (1.182) (1.510) (1.715) (1.801) (1.891) (1.986)
Interest Expense, Cash (680) (429) (369) (177) (140) (95) (33) 3,0
Taxes (144) (69) (182) (270) (378) (498) (646) 1,5
Working Capital (86) (1.350) 96 170 (18) (18) (20) 0,6
0,3 0,5 0,3 0,2
CFO (265) (683) 679 1.521 1.857 2.359 2.968
Capex -386 -590 -755 -600 -600 -600 -600
FCF -650 -1.273 -75 921 1.257 1.759 2.368 Cash '19 '20 '21 '22 '23 '24+
Cash 1.687 2.643 2.974 3.720 4.707 6.089 7.959 Debt Breakdown Exposure
Total Debt 4.034 3.490 3.706 3.614 3.614 3.614 3.614 Bonds 41% BRL 69%
Capialized Leases 8.126 8.272 10.569 12.007 12.607 13.237 13.899 Term Loan 59% USD 31%
Net Debt + Leases 10.474 9.119 11.301 11.901 11.514 10.763 9.555
Net Debt + Leases / EBITDAR 5,8x 3,9x 4,3x 3,4x 2,7x 2,2x 1,7x David Neeleman 5,3% United Airlines 8,0%
Interest Coverage 2,7x 5,5x 7,2x 19,8x 30,0x 51,0x 170,2x Trip 8,6% Other 78,1%
FCF / Net Debt -5,3% -12,2% -0,8% 8,2% 10,6% 15,3% 22,0%

AZULBZ '24 5,875 26-10-2024 400 Y No B+ / B1 / - 96,02 4,50 6,75 442 441
Handbook
Gol (B- / B1 / B) Airlines

Our view: After several difficult years, GOL is now in a sweet spot to reap the benefits of better economic prospects in the Brazilian
airline industry. Capacity rationalization, bankruptcy of Avianca Brazil (to which GOL has the highest network overlap), measures to
strengthen the balance sheet, cost efficiencies, lower fuel taxes and the transition to lower cost fleet are all driving a better outlook for
tis financials. The B/S improved considerably with net leverage expected decline below 4x going forwards (on an Adj. Net Debt /
EBITDAR basis). Still, there are several concerns, namely i) delays on the fleet transition program due to the Boeing 737 Max 8 issues,
and ii) BRL volatility which has been the main driver of the bond’s performance, given GOL’s high FX risk exposure. We see GOL as
a high beta bull case on Brazil (and the BRL), with GOL 25s (8.1% YTW,577bps z-spread) offering an attractive spread pickup of
220bps over LATAM 24s and 150bps over Azul 24s.
Recent: (i) GOL announced that it will take part in Avianca’s restructuring process, bidding for slots for at least US$70mn and at least
one UPI in an upcoming auction; (ii) US$300mn 2024 Convertible bond issuance (at a low 3.75% coupon) for liability management
purposes; (ii) 2019 guidance maintained, with sales around ~R$12.9bn in 2019 and ~R$14.2bn in 2020, but operating margins were
revised upwards, reflecting lower jet fuel costs (18% in 2019 and 19% in 2020, both increasing by 100bps). Net leverage targets
(IFRS16 adjusted) are of 2.9x and 2.4x for 19 and 20, respectively; (iii) good Q: revenues +10% y/y R$3.2bn with EBIT margin at 21%
- a solid 6.6% yield improvement & load factor of 81.9% (+90bps y/y) drove RASK up 7.5% y/y. CASK ex-fuel was up 4%, mainly on
a weaker BRL; Following the strong EBITDAR expansion (+54% y/y), GOL’s balance sheet deleveraged further, with adj. net debt-to-
LTM EBITDAR (ex perps) at 3.6x (from 4.8x last Q). Cash position remained healthy at R$2.1bn (from R$1.9bn last quarter).
Strengths: (i) strong market position in Brazil (36% market share); (ii) rational competition in Brazilian market, strengthened by the
Avianca Brasil bankruptcy; (iii) taking measures to strengthen the balance sheet & achieve cost efficiencies such as network
rationalization, liability management; (iv) high liquidity; (v) cost savings with lower fuel tax and the transition to the newer aircrafts.
Concerns: (i) exposure to volatile jet fuel/oil prices; (ii) very high FX risk exposure (~15% revenues in USD, 88% of debt in USD); (iii)
risks associated with the Boeing 737 Max 8 (delays in fleet renewal); (iv) risk of higher capex with the Avianca Brasil acquisition

GOL (R$ mn) 2015 2016 2017 2018 2019E 2020E 2021E FCF & Net Debt / EBITDA (R$ bn)
Domestic ASK, y/y 0,2% -5,4% 0,9% 2,3% 3,0% 4,0% 2,5%
RASK, y/y -3,3% 8,3% 3,9% 7,3% 8,5% 2,2% 2,8% 11,0x 1,4 1,5 1,7
0,7
CASK, y/y 3,7% -1,1% 1,8% 3,4% 6,9% -0,1% 1,6%
5,7x
Load Factor % 77,2% 77,5% 79,7% 80,0% 80,7% 79,8% 79,8%
Net Revenues 9.778 9.867 10.329 11.411 13.212 14.161 15.053 -0,3 0,1
% y/y -3% 0,9% 4,7% 10,5% 15,8% 7,2% 6,3% 4,8x 4,1x 3,6x 2,9x 2,4x
EBIT (ex one-off & IFRS16) -183 648 1.026 750 1.783 2.183 2.467 -1,9
% EBIT margin -1,9% 6,6% 9,9% 6,6% 13,5% 15,4% 16,4%
2015 2016 2017 2018 2019E 2020E 2021E
Aircraft Rent (1.100) (997) (940) (1.113) (1.265) (1.225) (1.250) 3,2
Interest Expense, Cash (996) (702) (850) (879) (447) (468) (378) 2,1
Taxes (884) (259) (6) (297) (292) (343) (396) 1,2 1,5
Working Capital 171 (31) 272 601 395 212 115 0,4 0,4 0,0 0,0
Others (396) (420) (334) (754) (300) (336) (360)
CFO (1.869) (268) 507 740 1.731 1.823 2.038 Cash '19 '20 '21 '22 '23 '24 '25+
Capex -435 -439 -739 -769 -650 -650 -650 Financial Debt Breakdown Exposure
FCF -2.303 -707 -232 -29 1.081 1.173 1.388 Bonds 45% BRL 12%
Cash 2.299 1.162 2.250 2.127 3.208 4.381 5.768 Term Loan 16% USD 88%
Total Debt 9.305 6.379 7.106 7.450 7.327 7.327 7.434 Debenture 12%
Capialized Leases 7.700 6.978 6.578 7.790 8.852 8.576 8.747 Other 27%
Net Debt + Leases 14.705 12.195 11.433 13.113 12.972 11.523 10.413
Net Debt + Leases / EBITDAR 11,0x 5,7x 4,8x 4,1x 3,6x 2,9x 2,4x Constantino Family 61% Air France 1%
Interest Coverage 1,3x 3,0x 2,8x 3,6x 8,1x 8,5x 11,4x Delta Air Lines 9% Other 29%
FCF / Net Debt -23,9% -4,8% -1,9% -0,3% 8,2% 9,0% 12,0%

GOLLBZ '22 8,875 24-01-2022 78 Y No B- / - / B 101,53 1,59 7,92 545 554
GOLLBZ '25 7 31-01-2025 650 Y No B- / - / B 94,27 4,57 8,26 592 593
GOLLBZ 'oo 8,75 ∞ 154 Y No - / B2 / B 94,72 10,80 9,24 669 642
Handbook
Latam Airlines (BB- / Ba3 / B+ {Pos}) Airlines

Our view: While momentum for airlines remains very positive in Brazil, which represents 35% of Latam revenues, Latam’s remaining
markets show a more challenging competitive scenario (i.e. higher competition in international routes, Sky entrance in Peru and high
competition in Chile domestic and Argentina decline). Also, the resumption of higher capex spending 2019-on (which was reduced in
2018) and the Multiplus tender offer should put some pressure on cash generation in 2019. We expect more Brazil-exposed airline
peers Gol and Azul to offer better prospects this year, both in terms of profitability as well as in deleveraging trends. We believe LATAM
bonds offer an attractive carry and are a more defensive play than peers (more diversification, less exposed to BRL trends and
balanced FX exposure) but that there’s not much spread tightening to capture, with Latair 24s trading at 6.0% YTM & 365bps z-spread.
Recent: (i) LATAM will participate in the Avianca restructuring process, bidding for slots for at least US$70mn and at least one UPI in
an upcoming auction; (ii) solid Q4 especially considering the 28% increase in fuel costs and depreciated local currencies; revenues
increased 0.8% y/y to US$2.79bn, while reported EBIT increased 9% y/y to US$295mn, with EBIT mg at 10.6% (+80bps y/y). Overall
adjusted US$ RASK ex-cargo was down 4% y/y (on yields down 1.6% and load factors down 200bps) reflecting (1) a 6.2% decline in
Domestic Brazil (which, in BRL terms, would have been up 10.2% y/y); (2) International RASK decline of 9.1% y/y, affected by long-
haul routes from Brazil and demand from Argentina; and (3) an 8.2% decline in Domestic SSC, on weaker currencies and hard comps
in Colombia. CASK ex-fuel was down 15.6% y/y, another positive showing, reflecting ongoing efficiency initiatives and local currency
depreciation; (iii) concluded Multiplus tender offer for the delisting of the company (0.2x negative impact on leverage); (iv) LATAM is
still waiting for US regulatory approval of the Joint Business Agreement with AA – last pending step.
Strengths: (i) hedging policy mitigates FX volatility; (ii) leader in high-growth markets and strong international network; (iii) diversified
revenue generation in terms of point of sales and ASK; (iv) benefiting from Brazil macro and industry trends (35% of revenues).
Concerns: (i) moderately high financial leverage; (ii) exposure to volatile FX and fuel prices (mitigated by hedging policy); (iii) growing
competition in international routes with global capacity growth; (iv) increase in competition from low-cost operators;

Latam Airlines (US$ mn) 2015 2016 2017 2018 2019E 2020E 2021E FCF & Net Debt / EBITDA (US$ mn)
ASK, y/y 1,3% -1,5% -1,8% 4,8% 3,2% 1,8% 1,8%
RASK, y/y -19,8% -4,5% 8,6% -2,6% 2,7% 1,9% 1,9% 5,8x 631
5,2x 492
CASK, y/y -20,6% -5,3% 7,4% -2,4% 2,1% 0,8% 0,6% 403
Load Factor % 83,0% 84,1% 84,8% 83,1% 83,0% 83,0% 83,0% 273
Net Revenues 10.126 9.527 10.164 10.368 10.993 11.405 11.833 4,5x 4,3x 4,2x 3,8x 3,5x
% y/y -19% -5,9% 6,7% 2,0% 6,0% 3,7% 3,8%
EBIT (ex one-off & IFRS16) 514 568 715 705 816 962 1.138 -6
% EBIT margin 5,1% 6,0% 7,0% 6,8% 7,4% 8,4% 9,6% -267 -269
2015 2016 2017 2018 2019E 2020E 2021E
% EBITDAR margin 19,5% 22,0% 22,6% 21,5% 21,7% 22,5% 23,3% Debt Profile (US$ bn)
Aircraft Rent (525) (569) (580) (538) (552) (552) (552)
Interest Expense, Cash (413) (416) (393) (356) (321) (321) (321) 1,5 1,4 1,5
Taxes 178 (163) (174) (84) (181) (229) (291) 1,0 1,1 0,9
0,8
Other Income (Expense) (533) 47 (26) (105) - - - 0,5
Working Capital 618 (219) (1) (12) (1) 9 9
CFO 1.298 777 1.122 1.129 1.331 1.473 1.603
Capex -1.565 -783 -491 -637 -1.600 -1.200 -1.200 Cash '19 '20 '21 '22 '23 '24 '25+
FCF -267 -6 631 492 -269 273 403 Financial Debt Breakdown Exposure
Cash 1.405 1.662 1.702 1.466 1.137 1.320 1.603 Aircraft Loans 54% BRL 12%
Total Debt 9.177 8.636 7.906 7.296 7.296 7.296 7.296 Bonds 24% USD 88%
Capialized Leases 3.676 3.983 4.057 3.768 3.864 3.864 3.864 Bank Loans 7%
Net Debt + Leases 11.448 10.957 10.261 9.599 10.023 9.840 9.557 Other 15%
Total Debt / EBITDAR 4,7x 4,1x 3,4x 3,3x 3,1x 2,8x 2,6x
Adj. Net Debt / EBITDAR 5,8x 5,2x 4,5x 4,3x 4,2x 3,8x 3,5x Shareholders
Interest Coverage 4,8x 5,0x 5,8x 6,2x 7,4x 8,0x 8,6x Cueto Group 28% Other 62%
FCF / Net Debt -2,4% -0,1% 5,8% 4,8% -2,8% 2,7% 4,1% Qatar Airways 10%

LTMCI 7 1/4 06/09/20 500 103,19 1,08 4,37 182 201 LTMCI 6 7/8 04/11/24 700 102,91 3,46 6,04 372 367
LATAIR 4 1/2 11/15/23 121 98,58 2,67 5,03 280 276 LTMCI 7 03/01/26 600 102,00 4,72 6,58 424 416
LATAIR 4.2 11/15/27 699 99,10 4,93 4,38 209 202
Handbook
Credito Real (BB+ {Neg} / BB+) Small & Mid-Size Banks

Our view: Credito Real continues to grow, maintaining adequate NPL levels and strong levels of capitalization (43.5% as of Q4, or
31.8% excluding the perps issued in 2017). Naturally, CREAL is very exposed to macro trends in Mexico (especially its funding or a
potential deterioration in labor markets) and has responded as a high beta play to Mexico’s shifting political environment. Nonetheless,
the spread pick-up over BB peers in the country has risen to an attractive +300bps. That said, CREAL 23s trading at 5.9% YTW and
360bps of z-spread, 55bps inside Unifin seem moderately attractive, in our view, considering CR's better ratings and capitalization
levels. The recently issued 26s look juicier trading 15bps inside Unifin and offering an attractive carry at 7.9% YTW.
Recent: (i) good Q4 results, as financial margin (NII) expanded 25.5% and net income grew 29% y/y; ROAE was flattish at 14.6% in
Q4 and down 3p.p. to 13% for FY18 (average equity rose on the back of the perp issuance; excluding the perp bond, ROAE would
have been up 2.4%); loan portfolio grew 25% y/y & 4% q/q, driven by SME (+111% y/y) and payroll in Mexico (+28.5% y/y). NPLs
improved 40bps q/q to 1.7% and remains one of the lowest in the industry; (ii) For 2019, CREAL guides for 20% loan portfolio growth
and double-digit net income growth, with stable ROA and provisioning. The company’s funding cost increased 30bps y/y to 12.0% and
management guided for an increase ~50bps in 2019 due to the issuance of the 2026 notes.
Strengths: (i) high quality and diversified loan portfolio (low-risk products, with a big share of payroll loans), (ii) market growth potential
(plenty of room to grow in SME’s segment and US); (iii) strong capital structure (43.5% capitalization ratio); (iv) strong portfolio
expansion in the last couple of years (CAGR 16-18 of 23%), through both organic growth and M&A; (v) improving levels of NPL’s,
maintaining healthy provisioning; (vi) opportunities arising within the Mexican administration objective to increase financial inclusion in
the country, partnering with federal government (using CREAL platform to reach and inject credit into SMEs and entrepreneurs).
Concerns: (i) funding mix with relevant reliance on capital market (37% in senior loans), although CREAL has access to credit lines
with both commercial and development banks ; (ii) competition and government entering low-income lending market might hurt financial
margins; (iii) high beta to the Mexican economy growth and labor market conditions; (iv) increased cost of funding due to pressure on
the sovereign; (v) FX mismatch risk

MXN$mn 2013 2014 2015 2016 2017 4Q18 2018 Debt Maturity Profile (US$ mn)
Loan Portfolio 10.424 13.805 17.610 23.927 29.015 36.319 36.319 CHF
Growth y/y 55% 32% 28% 36% 21% 25% 25%
MXN 635
Funding 9.952 13.394 17.444 24.589 27.469 33.754 33.754
Equity 4.353 5.357 6.713 9.277 14.768 15.809 15.809 USD 400
Allowances 203 420 486 768 1.068 1.068 1.068 92 192 230
1 24
Provision coverage 1,9% 3,0% 2,8% 3,2% 3,7% 2,9% 2,9%
'19 '20 '21 '22 '23 '26 Perp
Financial Margin 2.002 2.445 3.312 5.042 5.773 2.043 7.080
Net Income 1.004 1.225 1.371 1.714 1.661 568 1.955 Capital Structure Exposure
Growth y/y 64% 22% 12% 25% -3% 29% 18%
Senior Notes 37% USD 85%
Adj. Net Interest Income 1.597 2.180 2.966 4.210 4.430 1.591 5.280
ROAA 7,7% 6,9% 6,0% 5,0% 4,5% 4,7% 4,2% Credit Lines 26% MXN 5%
ROAE 24,5% 24,7% 22,2% 20,2% 15,9% 14,6% 12,9% Securitizanions 3% CHF 11%
NIM 23,3% 20,2% 21,1% 24,3% 21,8% 22,9% 21,7% Equity 25%
Efficiency ratio 25,1% 26,8% 35,9% 55,2% 50,2% 34,6% 42,4% Hybrid 9%
NPL´s 1,5% 1,9% 2,4% 2,2% 2,1% 1,7% 1,7%
Shareholders
Capitalization Ratio 41,8% 38,8% 38,1% 38,8% 50,9% 43,8% 43,5%
Equity / Total assets 28,8% 26,9% 25,8% 25,8% 35,0% 31,9% 31,9% Berrondo Family 25% Free Float 68%
Total Loans / Equity 2,29 2,50 2,60 2,65 1,86 2,14 2,14 Saiz Family 7%

CREAL '23 7,25 20-07-2023 625 Y No BB+ / - / BB+ 103,81 2,84 5,94 360 355
CREAL '26 9,5 07-02-2026 400 Y No BB+ / - / BB+ 107,14 4,40 7,94 560 553
CREAL 'oo 9,125 ∞ 230 Y Yes B+ / - / BB- 98,02 2,91 9,78 744 725
Handbook
Required Disclosures
This report has been prepared by Banco BTG Pactual S.A.

The figures contained in performance charts refer to the past; past performance is not a reliable indicator of future results.
BTG Pactual S.A. Global Credit Research: Recommendation Definitions
BTG Pactual S.A. employs a recommendation scheme designed to rank potential investment opportunities within non-government fixed income markets and se
Time BTG Pactual S.A.

Outlook for Expectation Definition
Horizon Terminology
Credit fundamentals of
6 months IMPROVING Improve
the company
Credit fundamentals of the company are anticipated
STABLE Remain stable
to <expectation> over the next six months
DETERIORATING Deteriorate
Bond 3 months BUY Outperform

Company/Bond is anticipated to <expectation> other
companies/bonds within a given peer group in the
HOLD Perform in line
local currency investment universe over a three-month
horizon
SELL Underperform
The recommendation is under review and a new
All recommendation
N/A Under Review N/A recommendation may be published within the next
types
18 days
Analyst Certification
Each research analyst primarily responsible for the content of this investment research report, in whole or in part, certifies that:
(i) all of the views expressed accurately reflect his or her personal views about those securities or issuers, and such recommendations were elaborated independently, including in relation to Banco BTG Pactual S.
(ii) no part of his or her compensation was, is, or will be, directly or indirectly, related to any specific recommendations or views contained herein or linked to the price of any of the securities discussed herein.
Research analysts contributing to this report who are employed by a non-US Broker dealer are not registered/qualified as research analysts with FINRA and therefore are not subject to the restrictions containe
company, public appearances, and trading securities held by a research analyst account.
Part of the analyst compensation comes from the profits of Banco BTG Pactual S.A. as a whole and/or its affiliates and, consequently, revenues arisen from transactions held by Banco BTG Pactual S.A. and/or its
Where applicable, the analyst responsible for this report and certified pursuant to Brazilian regulations will be identified in bold on the first page of this report and will be the first name on the signature list.
Handbook
Company Disclosures
Company Name
AEGEA 1, 2, 4, 6, 9, 18, 20, 22
Avianca 1, 2, 4, 6, 18, 19, 20, 22
Azul 18, 19, 20, 21, 22
BR Foods 1, 2, 4, 6, 18, 19, 20, 22
Braskem 1, 2, 4, 6, 18, 19, 20, 22
Canacol 18, 19, 20, 21, 22
Cemex 1, 2, 4, 6, 18, 19, 20
CENCOSUD 1, 2, 4, 6, 18, 19, 20
CMPC 1, 2, 4, 6, 18, 19, 20
Cometa 1, 2, 4, 6, 18, 19, 20
Credito Real 1, 2, 4, 6, 18, 19, 20
CSN 18, 19, 20, 21, 22
Ecopetrol 18, 19, 20, 21, 22
EntelChile 1, 2, 4, 6, 18, 19, 20
GeoPark 1, 2, 4, 6, 18, 19, 20
Gerdau 18, 19, 20, 21, 22
GOL 1, 2, 4, 6, 9, 18, 20, 22
HidroviasDoBrasil 1, 2, 4, 6, 18, 19, 20, 22
InRetail Consumer 18, 19, 20, 21, 22
Inretail Shopping 1, 2, 4, 6, 18, 19, 20
Intercement 1, 2, 4, 6, 18, 19, 20, 22
JBS 1, 2, 4, 6, 9, 18, 20
Klabin 1, 2, 4, 6, 18, 19, 20
LATAM 1, 2, 4, 6, 18, 19, 20
Marfrig 1, 2, 4, 6, 18, 19, 20, 22
Mexichem 1, 2, 4, 6, 18, 19, 20
OI 1, 2, 4, 6, 10, 18, 19, 22
PEMEX 1, 2, 4, 6, 18, 19, 20
Petrobras 1, 2, 4, 6, 9, 18, 20
REDE D'OR 1, 2, 4, 6, 9, 18, 20, 22
Rumo 1, 2, 4, 6, 9, 18, 20
Suzano 1, 2, 4, 6, 9, 10, 18, 22
Vale 1, 2, 4, 6, 18, 19, 20, 22
1. Within the past 12 months, Banco BTG Pactual S.A., its affiliates or subsidiaries has received compensation for investment banking services from this company/entity.
2. Banco BTG Pactual S.A, its affiliates or subsidiaries expect to receive or intend to seek compensation for investment banking services and/or products and services other than investment services from this comp
4. This company/entity is, or within the past 12 months has been, a client of Banco BTG Pactual S.A., and investment banking services are being, or have been, provided.
6. Banco BTG Pactual S.A. and/or its affiliates receive compensation for any services rendered or presents any commercial relationships with this company, entity or person, entities or funds which represents the s
9. Banco BTG Pactual S.A. has acted as manager/co-manager in the underwriting or placement of securities of this company/entity or one of its affiliates or subsidiaries within the past 12 months.
10. Banco BTG Pactual S.A., its affiliates or subsidiaries makes a market in the securities of this company.
18. As of the end of the month immediately preceding the date of publication of this report, neither Banco BTG Pactual S.A. nor its affiliates or subsidiaries beneficially own 1% or more of any class of common equ
19. Neither Banco BTG Pactual S.A. nor its affiliates or subsidiaries have managed or co-managed a public offering of securities for the company within the past 12 months.
20. Neither Banco BTG Pactual S.A. nor its affiliates or subsidiaries engaged in market making activities in the subject company's securities at the time this research report was published.
21. Banco BTG Pactual S.A. or its affiliates or subsidiaries have not received compensation for investment banking services from the companies in the past 12 months
22. Banco BTG Pactual S.A. or its affiliates or subsidiaries do not expect to receive or intends to seek compensation for investment banking services from the companies within the next 3 months.
Handbook
Global Disclaimer
This report has been prepared by Banco BTG Pactual S.A. (“BTG Pactual S.A.”), a Brazilian regulated bank. BTG Pactual S.A. is the responsible for the distribution of this report in Brazil. BTG Pactual US Capital
the U.S. Securities and Exchange Commission and a member of the Financial Industry Regulatory Authority and the Securities Investor Protection Corporation is distributing this report in the United States. BTG Pa
US assumes responsibility for this research for purposes of U.S. law. Any U.S. person receiving this report and wishing to effect any transaction in a security discussed in this report should do so with BTG Pactu
New York, NY 10022.
This report is being distributed in the United Kingdom and elsewhere in the European Economic Area (“EEA”) by BTG Pactual Europe LLP (“BTG Pactual UK”), which is authorized and regulated by the Financial C
also be distributed in the United Kingdom and elsewhere in the EEA by BTG Pactual S.A. and/or BTG Pactual US. BTG Pactual UK has not: (i) produced this report, (ii) substantially altered its contents, (iii) changed t
this report prior to its issue by BTG Pactual US. BTG Pactual UK does not distribute summaries of research produced by BTG Pactual US.
BTG Pactual Chile S.A. Corredores de Bolsa (“BTG Pactual Chile”), formerly known as Celfin Capital S.A. Corredores de Bolsa, is a Chilean broker dealer registered with Comisión para el Mercado Financiero (C
report in Chile and BTG Pactual Perú S.A. Sociedad Agente de Bolsa (“BTG Pactual Peru”), formerly known as Celfin Capital S.A. Sociedad Agente e Bolsa, registered with Superintendencia de Mercado de Val
this report in Peru. BTG Pactual Chile and BTG Pactual Peru acquisition by BTG Pactual S.A. was approved by the Brazilian Central Bank on November 14th, 2012.
BTG Pactual S.A. Comisionista de Bolsa (“BTG Pactual Colombia”) formerly known as Bolsa y Renta S.A. Comisionista de Bolsa, is a Colombian broker dealer register with the Superintendencia Financeira de Colo
in Colombia. BTG Pactual Colombia acquisition by BTG Pactual S.A. was approved by Brazilian Central Bank on December 21st, 2012.
BTG Pactual Argentina is a broker dealer (Agente de Liquidación y Compensación y Agente de Negociación Integral ) organized a nd regulated by Argentinean law, registered with the Exchange Commission of A
Nro. 720 and responsible for the distribution of this report in Argentina. Additionally, the Brazilian Central Bank approved the indirect controlling participation of Banco BTG Pactual S.A. in BTG Pactual Argentina on
References herein to BTG Pactual include BTG Pactual S.A., BTG Pactual US Capital LLC, BTG Pactual Europe LLP, BTG Pactual Chile and BTG Pactual Peru and BTG Pactual Colombia and BTG Pactual Ar
under such circumstances as may be permitted by applicable law. This report is not directed at you if BTG Pactual is prohibited or restricted by any legislation or regulation in any jurisdiction from making it available
BTG Pactual is permitted to provide research material concerning investments to you under relevant legislation and regulations. Nothing in this report constitutes a representation that any investment strategy or rec
to a recipient’s individual circumstances or otherwise constitutes a personal recommendation. It is published solely for information purposes, it does not constitute an advertisement and is not to be construed as a
any securities or related financial instruments in any jurisdiction. Prices in this report are believed to be reliable as of the date on which this report was issued and are derived from one or more of the following: (i) sou
(ii) the quoted price on the main regulated market for the security in question; (iii) other public sources believed to be reliable; or (iv) BTG Pactual's proprietary data or data available to BTG Pactual. All other inform
which this report was issued and has been obtained from public sources believed to be reliable. No representation or warranty, either express or implied, is provided in relation to the accuracy, completeness or re
respect to information concerning Banco BTG Pactual S.A., its subsidiaries and affiliates, nor is it intended to be a complete statement or summary of the securities, markets or developments referred to in the
investigation and analysis of such information before taking or omitting to take any action in relation to securities or markets that are analyzed in this report. BTG Pactual does not undertake that investors will obta
profits nor accept any liability for any investment losses. Investments involve risks and investors should exercise prudence in making their investment decisions. BTG Pactual accepts no fiduciary duties to recipie
acting in a fiduciary capacity. The report should not be regarded by recipients as a substitute for the exercise of their own judgment. Opinions, estimates, and projections expressed herein constitute the current judg
report as of the date on which the report was issued and are therefore subject to change without notice and may differ or be contrary to opinions expressed by other business areas or groups of BTG Pactual as a re
the personal views of analysts may differ from one another, Banco BTG Pactual S.A., its subsidiaries and affiliates may have issued or may issue reports that are inconsistent wi th, and/or reach different conclu
opinions, estimates, and projections must not be construed as a representation that the matters referred to therein will occur. Prices and availability of financial instruments are indicative only and subject to change
coverage solely at the discretion of BTG Pactual Investment Bank Research Management. The analysis contained herein is based on numerous assumptions. Different assumptions could result in materially differe
of this report may interact with trading desk personnel, sales personnel and other constituencies for the purpose of gathering, synthesizing and interpreting market information. BTG Pactual is under no obligation to
except when terminating coverage of the companies discussed in the report. BTG Pactual relies on information barriers to control the flow of information contained in one or more areas within BTG Pactual, into oth
compensation of the analyst who prepared this report is determined by research management and senior management (not includin g investment banking). Analyst compensation is not based on investment bank
revenues of BTG Pactual Investment Bank as a whole, of which investment banking, sales and trading are a part. The securities described herein may not be eligible for sale in all jurisdictions or to certain categori
are not suitable for all investors, and trading in these instruments is considered risky. Mortgage and asset-backed securities may involve a high degree of risk and may be highly volatile in response to fluctuat
performance is not necessarily indicative of future results. If a financial instrument is denominated in a currency other than an investor’s currency, a change in rates of exchange may adversely affect the value or pr
instrument mentioned in this report, and the reader of this report assumes any currency risk. This report does not take into account the investment objectives, financial situation or particular needs of any particula
advice based on their own particular circumstances before making an investment decision on the basis of the information contained herein. For investment advice, trade execution or other enquiries, clients shou
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and may be based on certain assumptions. Different assumptions, by BTG Pactual S.A., BTG Pactual US, BTG Pactual UK, BTG Pactual Chile and BTG Pactual Peru and BTG Pactual Colombia and BTG Pactua
different results. This report may not be reproduced or redistributed to any other person, in whole or in part, for any purpose, without the prior written consent of BTG Pactual and BTG Pactual accepts no liability w
Additional information relating to the financial instruments discussed in this report is available upon request. BTG Pactual and its affiliates have in place arrangements to manage conflicts of interest that may aris
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Fixed Income Research

BTG Pactual Global Research

Latam Corporate Bonds Handbook

Thomas Tenyi, CFA

ANALYST CERTIFICATION AND REQUIRED DISCLOSURES BEGIN ON PAGE 34

Petrobras (BB- / Ba2 / BB-) Oil & Gas

Table 1: Financials (US$ mn) Table 2: Highlights

Table 3: Outstanding USD-denominated Bonds (>US$1bn)

Ecopetrol (BBB- / Baa3 / BBB) Oil and Gas

Table 4: Financials (US$ mn) Table 5: Highlights

Table 6: Outstanding USD-denominated Bonds

Pemex (BBB+ {Neg} / Baa3 / BBB- {Neg}) Oil and Gas

Table 7: Financials (US$ mn) Table 8: Highlights

Canacol (B1 / BB-) Oil and Gas

Table 9: Financials (US$ mn) Table 10: Highlights

Table 11: Outstanding USD-denominated Bonds

Geopark (B+ / B+) Oil and Gas

Table 12: Financials (US$ mn) Table 13: Highlights

Table 14: Outstanding USD-denominated Bonds

Braskem (BBB- / Ba1 / BBB-) Petrochemicals

Table 15: Financials (R$ mn) Table 16: Highlights

Table 17: Outstanding USD-denominated Bonds

Mexichem (BBB- / Baa3 / BBB) Oil and Gas

Table 18: Financials (US$ mn) Table 19: Highlights

Table 20: Outstanding USD-denominated Bonds

Gerdau (BBB- {Pos} / Ba1 {Pos} / BBB-) Metals & Mining

Table 24: Financials (R$ mn) Table 25: Highlights

Table 26: Outstanding USD-denominated Bonds

CSN (CCC+ {Pos} / B3 / B-) Metals & Mining

Table 27: Financials (R$ mn) Table 28: Highlights

Table 29: Outstanding USD-denominated Bonds

CMPC (BBB- / Baa3 / BBB) Pulp & Paper

Table 30: Financials (US$ mn) Table 31: Highlights

Table 32: Outstanding USD-denominated Bonds

Klabin (BB+ / BB+) Pulp & Paper

Table 33: Financials (R$ mn) Table 34: Highlights

Table 35: Outstanding USD-denominated Bonds

Suzano (BBB- / Ba1 / BBB-) Pulp & Paper

Table 36: Financials (R$ mn) Table 37: Highlights

Table 38: Outstanding USD-denominated Bonds

BRF (BB- / Ba2 {Neg} / BB) Proteins

Table 39: Financials (R$ mn) Table 40: Highlights

Table 41: Outstanding USD-denominated Bonds

JBS (BB- {Pos} / Ba3 / BB-) Proteins

Table 42: Financials (R$ mn) Table 43: Highlights

Table 44: Outstanding USD-denominated Bonds

Marfrig (BB- / B2 / BB-) Proteins

Table 45: Financials (R$ mn) Table 46: Highlights

Table 47: Outstanding USD-denominated Bonds

Cencosud (Baa3 {Neg} / BBB-) Consumer

Table 48: Financials (CLP$bn) Table 49: Highlights

Table 50: Outstanding USD-denominated Bonds

Table 51: Financials (US$ mn) Table 52: Highlights

Table 53: Outstanding USD-denominated Bonds

Rede D’Or (BB- / BB) HealthCare

Table 54: Financials (R$ mn) Table 55: Highlights

Table 56: Outstanding USD-denominated Bonds

Hidrovias (Ba3 / BB) Infrastructure

Table 57: Financials (R$ mn) Table 58: Highlights

Table 59: Outstanding USD-denominated Bonds

Rumo (BB- / BB {Pos}) Infrastructure

Table 60: Financials (R$ mn) Table 61: Highlights

Table 62: Outstanding USD-denominated Bonds