By Carolina Mandl and Tatiana Bautzer
SAO PAULO, March 20 (Reuters) - Canada's Brookfield Asset Management Inc BAMa.TO is preparing a $1.6-billion local bond sale in Brazil to help finance part of its investment in a Brazilian gas pipeline, three people with knowledge of the matter said.
In what would be Brazil's largest local bond sale in two years, Brookfield is in talks to issue 5.2 billion reais ($1.6 billion) in local bonds as part of a strategy to leverage its $5.2 billion investment in the gas pipeline and raise its profits with the deal.
The bonds will be issued by Brookfield's unit Nova Transportadora do Sudestes (NTS) and will mature in five years, two of the sources said, asking for anonymity since talks are still private. One of the sources said NTS is expected to pay around 109 percent of Brazil's interbank benchmark rate known as CDI.
The take out strategy will allow Brookfield to free part of the capital invested in NTS with medium term bonds. In September 2016, Petroleo Brasileiro SA agreed to sell 90 percent of its gas pipeline NTS to a group of investors led by Brookfield, Brazil's state oil company largest divestment so far. (http://reut.rs/2GKxFJ5)
Brookfield declined to comment.
According to the sources, local asset management units of Itaú Unibanco Holding SA ITUB4.SA and Banco do Brasil SA BBAS3.SA , alongside with Banco Bradesco SA BBDC4.SA are in talks to acquire the bonds.
NTS' bond sale is expected to be the largest in Brazilian local bonds market since September 2016, when NCF Participações, a shareholder in Banco Bradesco SA BBDC4.SA , sold 5.6 billion reais in domestic bonds, according to securities industry group Anbima. ($1 = 3.2929 reais) (Editing by David Gregorio)