Credit Suisse took a quick payback swipe at Merrill Lynch by poaching Enrico Carbone for its Brazilian investment banking division. Last week, Merrill hired Credit Suisse’s Adriano Borges, head of real estate investment banking in Brazil, naming him managing director in charge of real estate and technology. Yesterday, CS said it hired Carbone, a director at Merrill in charge of various sectors, including retail, healthcare, technology and industrial services, to replace Borges. He will report to Jose Olympio, head of investment banking for Brazil, covering real estate and technology, among other sectors. The Swiss shop is responding swiftly to the recent Merrill raid, which has claimed two Credit Suisse scalps. But it remains to be seen if the swap was equitable. Whether because of lucky timing or skill, Borges is seen as something of a rainmaker, having ridden a wave of real estate equity offerings over the past two years. That Merrill awarded him an MD title says something about its interest in the banker, who was only a director at CS. And while Carbone has earned no such change in title, he’s moving to a shop with much longer track record of success in Brazilian investment banking. CS dominated LatAm equity in 2007, topping the league tables, and came in second in M&A by fee volume. The tit for tat between the two shops may cool down for the moment. Merrill made a point of saying last week that the Borges hire concludes its most recent hiring push in Brazil.
Yearly Archives: 2008
Citi, UBS Diverge on LatAm Equity Call
Two of the region’s big research shops are presenting investors with conflicting calls on the relative value of equities in Mexico and Brazil. Citi yesterday restated its preference for Mexican equities over Brazil based on the view that Mexico’s falling interest rates will benefit stocks. Citi sees Mexican rates falling by as much as 125bp to 6.25% by year-end, while in Brazil, it believes the tightening cycle could take the Selic on a 175bp run to 13.00% in the same time period. UBS Pactual, on the other hand, says the rate increases are already priced into Brazilian equities, and that solid growth and strong commodity prices will boost earnings. In Mexico, where equities have outperformed so far this year, investors are already pricing in that country’s resilience to the US downturn, says UBS. Brazil will announce its decision on rates today, with economists expecting a 25bp-50bp rise, while Banxico will announce its decision to lower or keep rates unchanged on Friday.
Investor Interest in LatAm Equity Wanes: Survey
LatAm is less appealing of an emerging market for equity investors than it was a month ago, according to the latest Merrill Lynch fund manager survey. The region, and in particular Brazil ranked high among investor favorites last month, as evidenced by their overweight positions. But this month EMEA, and in particular Russia, now enjoy the highest overweight positions, with the latter accounting for most of the change, thanks to a substantial surge in the past month. Chile and Mexico are still in the underweight category of EM countries, along with most of the asset class save for Turkey, Thailand, Brazil and Russia. And EM as a whole is no longer the top equity pick for global managers, says Merrill. “The US is now the most preferred global equity market by consensus for the first time since November 2001,” says the report, though EM still beats out Europe and Japan equities. Within EM, the main drivers for investment choices appear to be domestic demand and consumer plays, rather than US demand or commodity-oriented plays.
Mexico May Hold on Rates
Mexico’s central bank is expected by many economists to leave the policy rate unchanged at 7.50% after its meeting on Friday. “It is premature to talk about rate cuts at this juncture,” says Alberto Ramos, an analyst at Goldman Sachs. “First, because both headline and core inflation are still outside the central bank comfort zone. Second, there is no immediate need to increase the monetary stimulus to the economy in order to support activity, as the recent activity leading indicators have turned out stronger then expected,” he adds. But not everyone shares that view. In its daily report yesterday, Citi said it believes in a 25bp cut in the rate as part of a preventative measure in the face of a weakening US economy.
Fitch Upgrades Uruguay’s NBC
Fitch has upgraded Uruguay’s Nuevo Banco Comercial’s (NBC) foreign currency long-term issuer default rating to BB minus from B+ and to AA(ury) from AA-(ury) on the local scale, with a positive outlook. In addition, Fitch affirmed the local currency long-term IDR at BB minus. The upgrade reflects the bank’s improving operating performance. The agency expects NBC’s operating performance to continue to improve, although its net income could be affected again by variations in the exchange rate. NBC is the second-largest private bank in Uruguay. It had 16.9% of the system’s assets at the end of 2007, Fitch says.
State of Mexico Leads Jumbo MXP Refinance
Capitalizing on upgrades and market opportunity, State of Mexico is wrapping up the final phase of a MXP27bn debt refinance which extends duration and slashes the price on most liabilities. The amortizing deal in 20, 25 and 30-year tranches, with roughly a third of the amount in each, has an average duration of 12.5 years. The weighted average spread is 48bp over 28-day TIIE. “Right now, we are at TIIE plus 170bp, so you can see the benefit of having a [new] bank credit,” State of Mexico’s finance secretary Luis Videgaray tells LatinFinance. The deal benefits from significant ratings upgrades – including 6 notches from Moody’s – and market improvements since the new administration took over in 2005. Structural enhancements pushed it to AA+ on the local scale. For the first time, Banobras provided a first loss guarantee, for 27% of the deal. Typically the government development bank acts as a lender. The transaction also has a pledge of federal revenue shares and was self syndicated by State of Mexico, which staged a beauty content for banks. Videgaray says he detected better pricing in the bank market than for bonds and got demand of MXP44bn for the MXP27bn deal, some of it out to 30 years. Eight banks participated in all. The final phase of the transaction is expected to close May 2 and involves long-term swaps of floating to fixed rate MXP. “Right now the swaps curve is very flat, so it makes sense,” says Videgaray.
Mexico State Refinance Seen Setting Benchmark
State of Mexico’s innovative MXP27bn refinancing, several months in the making, may set a trend for indebted Mexican entities, including its innovative use of a Banobras guarantee. “Parts of the deal may be replicated, particularly the guarantee,” State of Mexico’s finance secretary Luis Videgaray tells LatinFinance. He adds that some of the transaction being wrapped up now might ultimately find its way to other markets. “The loans can be securitized, so they may end up in the bond market,” says the official. Like the sovereign, State of Mexico aims to cut net debt each year. It has gone from MXP30bn when the administration started in 2005 to MXP29bn total debt this year. Mexico is the country’s biggest state by population and revenue, says Videgaray, who is very happy with the refinancing. “We are pleasantly surprised by what we can do,” says the official.
Gerdau Forges $500m Syndication
Brazil’s Grupo Gerdau is preparing to raise $500m in the loan market for an unknown acquisition. The facility, being shopped to MLAs, has a 3-year tenor and offers Libor plus 125bp, say bankers away from the transaction. Last Fall, Gerdau clinched a $2.75bn acquisition facility that included a 5-year working capital piece at Libor plus 125bp, as well as 5- and 6-year trade tranches at 100bp and 125bp over. The new facility is heard to be a separate initiative, and its syndication will overlap with the company’s $2bn equity offering in the US and Brazil, set to price on April 24. Citi is leading the loan financing, while JPMorgan and Itau BBA have books on the equity offering.
Panamerican Energy Brings $150m Loan
Argentina’s Panamerican Energy is raising a $160m working capital facility via Calyon, JPMorgan and ABN AMRO. The 3-year loan pays Libor plus 225bp and is out to MLAs. Also in Argentina, Pluspetrol is heard in the market with a $100m FMO A/B loan. ABN AMRO has been hired to lead the syndication of the B portion of that facility.
Cruzeiro Do Sul Readies More USD Bonds
Brazil’s Banco Cruzeiro do Sul is planning to price a dollar-denominated bond as soon as next week. The amount of the offering has not been set. UBS and BCP are managing the sale. In February the bank placed $100m in 2009 bonds at 7.5%, starting a parade of Brazilian mid-size banks coming to the international bond market to issue short dated year paper. BicBanco launched Monday the sale of $100m 2010 notes, and Brazil’s Banco Fibra priced a 6.75% $150m 2010 bond last week.