Bloomberg News

Gafisa CEO Says Stock Plunge Fueled by Borrowing-Cost Concerns

December 20, 2011

Dec. 19 (Bloomberg) -- Brazilian homebuilder Gafisa SA’s stock plunge may stem from investors’ concerns about the company’s higher-than-expected borrowing costs in a sale of promissory notes, Chief Executive Officer Alceu Duilio Calciolari said.

Gafisa isn’t using the sale, announced Dec. 5, to shore up its balance sheet or refinance debt as it already has 800 million reais ($428.4 million) in cash, Calciolari said. The company plans to use the proceeds as bridge financing for a “strategic” plan to be carried out over the next four months, he said, declining to elaborate further. The stock plunged 13 percent today, the most since November 2008, and is down 20 percent since the note sale was announced.

“It must have caused some discomfort because I think there was an expectation for a lower cost,” Calciolari said in a telephone interview from Sao Paulo.

Brazil’s fourth-biggest homebuilder by revenue plans to issue 230 million reais in promissory notes with maturities of 360 days, the first series at 126 percent of the interbank overnight lending rate, known as CDI, and the second at 125 percent, according to its Dec. 5 regulatory filing.

Concerns over Gafisa’s ability to carry out a plan to reduce business at low-income unit Construtora Tenda SA and focus more on high-income Alphaville Urbanismo SA may also be fueling declines, the executive said. Profit plunged 60 percent in the third quarter from a year earlier amid rising costs at Tenda, the company said Nov. 14.

“The market got a bit scared,” he said. “We have to expect these exaggerated reactions.”

--Editors: Brendan Walsh, David Papadopoulos

To contact the reporter on this story: Alexander Cuadros in Sao Paulo at

To contact the editor responsible for this story: David Papadopoulos at

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