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Last summer, we hung up on Brazil, selling Telebras at near its high of $84. Now, Merrill Lynch's Allen Vine is recommending a way to dial back to Brazilian phones, but with a different ring. The Sao Paulo subsidiary of Telebras, Telesp (Telecomunicacoes Sao Paulo), has created its own subsidiary to pay for $300 million worth of NEC equipment (obtained from Japan via NEC do Brasil). The subsidiary is called Comtel, and it has issued $310 million worth of unrated bonds at 10.75 % to pay for the communications hardware over five years.  The bonds reach maturity in September 2004 and trade at around $103.38 in the U.S. and Luxembourg. Merrill Lynch is the market-maker.   Minimal risk Telebras supports Comtel's commercial risk but not its convertibility risk: i.e., the risk that Comtel will not be able to service its debt due to any Brazilian imposition of exchange controls. The effect of this risk is that Comtel gives you a yield of well over 10 %, while Telebras bonds only yield a shade over 6 %. And Comtel's five-year bond also has longer to run. In terms of credit, Telebras' is about as good as you can get in Brazil-or Latin America in general. And the Cardoso government is unlikely to impose currency controls. Merrill Lynch's approach to the  Comtel loan is similar to that for dollar constrained bonds issued by branches of foreign banks in Brazil. The parent banks (like Telebras) will not be in default if their branches cannot service debt. The head office only guarantees commercial risk. The difference is that while Comtel pays a 4 % premium to its parent, dollar-constrained bank bonds trade at very tight levels as compared to the paper of their parents. Telebras achieved cash-flow increases of 95.5 % for the nine months preceding September up to a mark of $5.5 billion. (We define cash flow as earnings before interest, taxes, depreciation, and amortization, or EBITDA). This dramatic up shift came about after whopping increases in politically sensitive phone tariffs, the proliferation of lines installed and operating, and improved traffic. So Telebras' EBITDA covers interest the firm pays more than 47 times, and default risk on the Comtel loan is therefore pretty minimal. In 1997, we expect other Telebras subsidiaries, such as Telebras (the Rio de Janeiro phone operator) and Telebrasilia (the national data-transmission system), to use the bond market to raise money. Telebras shares have traded down since the October cancellation of a $150 million stock sale at the parent level. Hurting the stock, too, has been concern about whether or not Brazil will allow privatization to proceed after politicos blocked the sale of a chunk of Companhia Vale do Rio Dolce, a steelmaker.

~ Books About Brazil ~ Lonely Planet Brazil (Brazil, 5th Ed)  by John Noble, Andrew Draffen, Robyn Jones, Chris McAsey, Leonardo Pinheiro Brazil the Land (Lands, Peoples, and Cultures, 79) by Malika Hollauder, Carolyn Black, Malika Hollander Frommer's Brazil  by Shawn Blore (Author), Alexandra de Vries (Author) Find Books On: .

While any U.S. brokerage can buy this bond, consider giving the business to Merrill Lynch. Remember that the benefit of using a discount broker is less for bonds than for stock, because what you really want is liquidity. A brokerage that trades a lot of a bond can cut the spread (the difference between the price paid by buyers and the price received by sellers). In Europe, use Union Bank of Switzerland. 
 

by Vivian Lewis

Reprinted from Global Investing. For a six-month trial subscription, send a check for $49 (add $10 if 'outside the U.S.) to Global Investing, P.O. Box 1945, Fort Collins, CO 80522-1945, USA. Or use a major credit card by phoning (800) 388-4237 or faxing (970) 221-3964.
 

Travel: Feasts and finds in Nassau

Nassau has several excellent restaurants that take themselves and their clients' pocketbooks very seriously.
But the one I like best and where I always dine when I'm visiting New Providence Island is Greyeliff, W. Hill Street, P.O. Box N1 0246, tel. (242) 322-2796, fax 326-6110, a fine old colo-nial mansion, standing in a luxuriant, tropical garden, that was once the home of a pirate before it became a restaurant cum-small-hotel, the winter home of the Earl and Countess of Dudley.

It is also right opposite Government House, another fine pink-and-white classical house, where the governor general lives; there's a big statue of Christopher Columbus outside

This is important because current theory holds that Chris, with his three ships, first touched the New World in the Bahamas, at an obscure, tiny island about an hour and a half flight away, called San Salvador.

However, he never came near New Providence but wound his way down the archipelago to Cuba, bestowing on the islands all sorts of Spanish names that have since been dropped.

As the restaurant never tires of telling people, everybody rich and vul-gar has eaten there: Princess Caroline of Monaco, King Constantine of Greece, Jackie Onassis, Sean Connery (natural-ly), the Beatles, King Olaf of Norway, the Bee Gees, Margaret Truman (remember her?), and numerous others

Yet, despite its fondness for the gliterati, I like the Greycliff. I like the big comfortable ground-floor drawing room with its antique furniture where predirmer drinks are served to the accompaniment of a tinkling piano; I like, in the surrounding rooms, the exquisitely laid tables with their crisp white cloths bearing the restaurant's own monogrammed glass and china; I like the perfect service; I like the vista out over the illuminated garden; and I like the food.
 

A computerized cellar

Most of all, though, I like the wine list that comes in the form of a computer track of with the latest information-age technology. Such wine is not cheap- first prize goes to an 1865 Lafite Rothschild at $19,200 a bottle, second place to an 1868 Chateau Yquem at $13,200.

I found something more modest (between $35 and $40), however, to drink with my goose pat6, followed by a small dollop of water ice known in France as a trou normande and intended to clear your palate for the main course. In my case, this was Lobster Greycliff, served cut up inside its own shell with a cream sauce and reminiscent of a lobster thermidore. My dinner was around $100.

Nevertheless, I decided to give myself an after-dinner treat. So I selected a freshly rolled Cuban cigar from the professional cigar roller, a Cuban lady who sits at a table in the hall, rolling cigars from a pile of top-grade Cuban tobacco leaves, lying on a moist towel to keep them fresh.

Cuban cigars are clearly popular with American tourists who have been deprived of El Presidente Fidel's best- selling export for decades by politicians vying for votes in Miami-without the prohibition's having the slightest impact on conditions on the island. Most of the shops along Bay Street advertise that they have Cuban cigars for sale.

There is little to be said for the big Bay Street straw market even if it is the largest in the world, unless you really want another straw hat, a straw bag, or a set of dreadful straw table mats.
 

On pirates and pineapples

Bay Street is also home to the Pompey Museum of Slavery and Emancipation; tel (242)326-2566,fax 393-2855, opposite George Street in the restored 18th-century slave market and named after a rebellious slave who lived on the island of Exuma. Admission is $1 for adults and $0.50 for children.

The most interesting thing about this museum is its account of how the slaves were actually freed in the Bahamas when slavery was abolished throughout the British Empire in 1834.
 

As slaves had few possessions, the museum is short of exhibits.

The same is true of Parliament's circular Nassau Public Library and Museum, a former prison where the books are stored in the cells, as well as the National Historical Museum on Shirley Street. Both have little more than a handful of old pictures and documents to display.

But I like the handsome pink-and -white Parliament buildings with their deep verandas and the statue of a rather perky-looking, young Queen Victoria wearing an absurd-looking crown. 

And I also like the smart Bahamian police, in their white helmets and jackets with bright scarlet flashes. 

Few people know that the first pineapples were discovered in the Bahamas on the island of Eleuthera. And an early governor, Lord Dunmore, liked them so much that when he returned to England he built himself a house in the shape of a pineapple. Hawaii owes a lot to the Bahamas.

Bahamians also invented two special words, junkanoo and Goombay. The first is a Mardi Gras type carnival dance in which competing teams of locals perform along Bay Street on Boxing Day, as the British call the day after Christmas because that's when people throw away the boxes their presents came in. Goombay y is a similar kind of revelry that takes place in the streets of Nassau during the summer. I did not see either. But I did discover and can highly recommend a local rum drink called the Goombay Smash. Highly explosive.