Shares in Brazilian clothier Le Lis Blanc tanked 20% at their debut Tuesday, following a butchered IPO that saw several revisions to price and size. The company’s executives – accompanied by runway models – rang the Bovespa opening bell Tuesday amid much fanfare. But there was blood on the catwalk after a fall to BRL5.40 per share, versus a BRL6.75 IPO price that netted the issuer just BRL144m, or $86m. With a greenshoe, the company could grow proceeds to BRL162m. However, in a market where liquidity is the height of fashion, this is less than half the BRL325m Le Lis Blanc hoped for when it ventured out in early April at BRL10.50-BRL12.50. Executives away from the transaction note that Artesia, the private equity firm that held 85% of Le Lis Blanc shares prior to the IPO, bought at a comparably low multiple, leaving it less exposed. The firm pulled a secondary share portion from the offer last week to make it more attractive for investors. Merrill Lynch and Morgan Stanley led the IPO, which proves that markets remain hostile to small Brazilian equity launches.
Yearly Archives: 2008
Industrial Heard Wrestling with Hybrid
An eerie silence about Guatemala’s Banco Industrial’s 2068 hybrid Tier-1 capital issue leaves bankers at competing shops assuming the worst. The exact amount of the Ba3/B+ rated Reg S issue was not specified, but a size of $30m was rumored to have placed with locals, well shy of the $100m expected. A coupon in the low 9% area was expected for the first 10 years, after which the interest floats at fixed spread above Libor. Despite captive demand from Guatemalan investors, pricing may have been aggressive for such a complicated structure. Last week in Europe, Natixis placed $750m in A1/A+ perpetual Tier-1 notes at 10%. Guidance was 9%-10% for the fixed portion of the Industrial issue. Credit Suisse is managing the transaction. Neither bankers on the deal nor the issuer answered requests for comment.
DB and Barcap Ride the Vene Express
It’s the deal debt bankers love to hate: the annual Venezuela jumbo trade that propels two second tier shops to the top. Last year it was ABN AMRO (with PDVSA), this year’s winners are Deutsche Bank and Barclays, which underwrote a $4bn sovereign issue Venezuela sold to hard currency-starved locals. The bond sale grew 25% from a planned $3bn after getting $9.29bn in orders. The 9.00% of 2023 and 9.25% of 2028 tranches priced last week at 115% of face value. They rocketed Deutsche and Barclays to first and second in DCM, with a combined 26% of the year-to-date LatAm market, Dealogic data shows. The transaction is part of a continuing effort to meet demand for foreign currency and strengthen the VEB in the black market. Only Venezuelan individuals or entities could participate in the sale, aimed mainly at companies in the food, medicine and capital goods sectors. Meanwhile, Brazilian steelmaker Gerdau’s $2.4bn multi-tranche equity follow-on last week propels global coordinator Itau BBA to the top of the LatAm ECM league tables with $1.44bn in credit across four deals. JPMorgan, the joint bookrunner follows in a close second place with $1.2bn across three deals. In M&A, Credit Suisse hogs the lead. (For full details, see League Tables on www.latinfinance.com.)
Mexican PE Fund Buys Education Company
Mexico-based private equity shop Nexxus Capital has acquired a 60% stake in private education provider Harmon Hall Holding. The purchase, made through the Nexxus Capital private equity fund III, cost between $25m-$30m, Roberto Terrazas, a director at the fund, tells LatinFinance. Harmon Hall specializes in teaching English in Mexico, with 105 language schools around the country. Nexxus focuses on sectors including health, education, tourism, services and housing, Terrazas adds.
Oi to Issue Shares, ADRs for Brasil Telecom
Following its expected acquisition of Brasil Telecom (BT), Telemar’s Oi plans to issue a new class of ADRs and Bovespa-listed shares, say the company’s IR officers. The new shares will reflect the consolidated ownership Oi will have of BT and its several subsidiaries. The size of the offering and the number of shares in each class are still undefined, says an IR executive. Oi will tender for existing shares of BT in a tag-along offer and a separate voluntary tender. Holders of BRTP3 preferred shares are to receive new TMAR shares at a ratio of 0.5 BRTP3 shares per new share. Owners of the two classes of BRTP4 ordinary shares will receive TMAR shares at a ration of .07 shares and 0.23 shares respectively. The new company will have three classes of TMAR shares. One of those classes will provide the underlying for the ADR. Credit Suisse advised Telemar and Citi advised BT on the acquisition.
Investors Cut Argentina Exposure
Global investors dramatically reduced their exposure to Argentine assets in the wake of a New York court ruling last week, as well as the government’s recently announced financing plan, says JPMorgan. Positions in sovereign external debt dropped sharply in April to the lowest since Q2 2006, says the shop’s latest EM fixed income survey. “Uncertainty surrounding Argentine debt has increased as a consequence of the recent legal action,” according to the survey. “This could potentially affect Argentina’s liability management operations in the year ahead and so raise greater uncertainty around the financing program.” The ruling made upon the request of a group of holdout bondholders suing the sovereign, temporarily blocks Argentina from transferring or selling bonds held in the depository Trust Company in New York. Separately, exposure to Argentine FX and rates was also dramatically reduced in reaction to the government’s recently announced financing program “which indicated that they will rely heavily upon domestic investors [for financing going forward,]” says the survey. JPMorgan’s FX score for Argentina dropped to its lowest since January 2005, as was its score for real rates. International investors cut exposure to nominal rates to form a net underweight position, while locals remain overweight.
Brazil Equity Outdoes Other EM
The Ibovespa and the MSCI Brazil have outperformed their peer indices in the last twelve months, according to Itau. Since the end of March 2007, the Ibovespa has risen some 44%, beating the Hang Seng in Hong Kong, which is up some 25%, and Mexico’s Bolsa, which is ahead just 7% in the period. The Brazil MSCI index is among the strongest outperformers in its category, rising close to 70% while the next closest competitor, the MSCI India, is up almost 30%, with Mexico lagging far behind, at under 10%. Within Brazil and EM, the strongest sector is by far the energy sector, according to the MSCI EM and MSCI Brazil. In Brazil, energy companies have risen 130% in the period, while the next biggest gainers are utilities and financials, with a distant 40% rise.
Caribbean Seen Reliant on Investment
Caribbean countries will depend on their ability to maintain a high level of investment as they enter the hurricane season amid a global economic downturn that could hurt tourism and remittance flows, according to S&P. The sustainability of both domestic and foreign investment is especially important because exports, the other main driving force for GDP growth, are becoming more vulnerable to the negative external environment, says the agency. “Overall, we expect the commitment to fiscal consolidation to prevail, increasing policymaking transparency to boost investor support, and a timely monetary response to help maintain stability in the exchange market,” says S&P. All this should afford the small and open Caribbean economies “adequate protection against the rising winds from the North,” notes S&P, referring to hurricanes and economic turbulence.
Fitch Upgrades Vitro Following Refi
Fitch has upgraded the national scale ratings of Mexican glassmaker Vitro to BBB minus (mex) from BB+(mex). The agency affirms Vitro’s foreign currency debt ratings at B, and its senior unsecured notes due 2012, 2013 and 2017 at B+. The outlook is stable for all ratings, which cover approximately $1.2bn in debt. Vitro’s ratings reflect the company’s improved financial profile and capital structure after a refinancing process completed at the beginning of 2007. That consisted of a sale of $1bn in senior unsecured notes in two tranches: $300m and $700m with final maturities of 2012 and 2017. With this deal, Vitro mitigates short-term refinancing and liquidity risks, while also eliminating structural subordination following the take out of secured operating subsidiary debt, says Fitch.
Chavez Sidor Valuation Falls Short
The Venezuelan government has assigned a value of $800m to steel processor Sidor, the state-owned news agency reports, a fraction of what its owner was expecting. Shareholders of Ternium, the Argentine holding company for Sidor, had placed a value of $3.2bn-$4.8bn on the asset. But president Chavez dismissed the valuation and threatened to nationalize the company by decree if an agreement could not be reached between the current owners and the government. The two sides met Monday to discuss the deal. Brazilian steel processor Usiminas owns 14.3% of Ternium, which has 57% of Sidor, according to BBI.