Brazilian investors paint a poor picture about the prospects of any immediate improvements in the equity markets in 2012 as broader international problems weigh on secondary performance. “There is an expectation for a strengthening in the second quarter of 2012. It has turned from a negative perspective to a positive one. But that doesn’t make a difference when you are trading on European headlines,” says Joao Carlos Scandiuzzi, chief strategist at BTG Pactual Asset Management, which has BRL85bn ($47bn) of equity assets under management. While bankers are optimistic some new deals will get done, many investors are skeptical. “The investor community is more conservative when we analyze new issues, so I think it is going to be another tough year in the equity markets,” says Pedro Sales, equity portfolio manager at Credit Suisse Hedging Griffo. “It’s not a question of China, Europe or the US, it is just that the new issuers have not been performing well.” His shop, which has $30bn equivalent under management, including asset management and private banking, has been focused on picking companies that have been trading down, including Helbor in real estate, Itau in banking, and Ultrapar in the fuel distribution space. “Stock picking in Brazil is extremely important. It’s not that easy to find good investments. You have to dig,” he adds. Would-be new issuers should pay attention to investors’ desire for size and liquidity, he says. “There are a lot of companies waiting to issue. Some of them are large and some of them are small, but most lack the quality that we saw in the beginning of the cycle in 2006. When you combine the power that the buyside now has with the quality of the pipeline, probably you will begin to see a more fair value with lower pricing,” says Alexandre Silveiro, portfolio manager at Quest Investimentos.
Yearly Archives: 2011
Contour Global Pulls Colombia IPO
Another 2011 LatAm IPO has failed Wednesday when ContourGlobal LatAm’s COP273bn ($143m) sale failed to get a minimum demand. This move comes as surprise as it was thought the Colombia market was relatively well insulated against broader global shocks. The unit of US-based energy investment company ContourGlobal had planned to sell 27.6m shares, or about 28% of itself, at COP9,900 each, in a sale period that closed Monday. Colombian regulations allow the issuer to set a minimum, which if not reached allows a cancellation of the sale. Bancolombia and Corredores Asociados were managing the sale, intended to raise funds for new projects. The company’s main operating assets include a stake in the Termopaipa and Termoemcali power plants in Colombia, as well as a wind farm and two hydroelectric projects in Brazil.
Delta Takes Gol Stake
Delta Airlines has agreed to acquire a minority stake in Brazil’s Gol Linhas Aereas Inteligentes for $100m, in a deal that may cause some Gol shareholder dilution. The US carrier is expected to pay $100m for preferred shares in the hands of controlling shareholders at a rate of BRL22.00 ($12.25) per ADS, Gol says. The stake is estimated to be about 2.9%, Citi says in a report. As part of the deal, the controlling shareholders will issue new ADS in a capital increase of BRL280m, and Delta will receive a seat on the board of the low cost Brazilian carrier. The deal came at a 53% premium over Gol’s Tuesday close, noted a person close to the transaction. Morgan Stanley and law firm Milbank, Tweed, Hadley & McCoy advised Gol. Executives at Gol told analysts in a conference call that the transaction will lead to synergies but they would not yet quantify these. Some observers expressed reservations about what the deal would mean for Gol’s minority shareholders. “We are concerned that the controlling shareholders are selling a position in the company at a bid premium versus Tuesday’s close…Preferred shareholders will get a much better deal, versus the dilution faced by minority shareholders, once the capital increase occurs,” Citi says. Gol shares closed Wednesday at BRL15.59.
IRSA CFO Changes Roles
Gabriel Blasi is to step down as CFO of Argentine real-estate company IRSA, according to a source familiar with the matter. He will move to a similar position at Banco Hipotecario, part of the IRSA group along with Cresud and Alto Palermo. Matias Gaivironsky replaces Blasi as CFO, a position Blasi held for 7 years.
Light Readies Debenture
Brazilian utility Light wants to sell BRL425m ($236m) in domestic bonds. It does not give details on the tenor or terms of the deal, to be done under the rule 476 restricted format. Proceeds are to be used to repay short-term debt due in February. Additionally, the issuer says it will seek to borrow BRL80m for at least 3 years to fund working capital, without elaborating on the source. Light officials did not return a request for additional details.
Peru Holds Rates
Peru’s central bank has decided to keep the country’s benchmark interest rate at 4.25%, in line with expectations. The decision takes into account factors including lower growth in spending, international financial risks, and an increase in inflation, the bank says.
Rabobank Sells UF2m in Chile
Rabobank has raised UF2m (87.4m) in a Chilean domestic bond sale. The Dutch bank priced the inflation-linked 5-year bullet at 96.99 with a 3.05% coupon to yield 3.75%, or government bonds plus 128bp. Demand was 1.5x, according to a banker on the deal. Proceeds will be used to fund the bank’s operations. The bond is rated AAA on a national scale. Celfin and Deutsche Bank managed the sale.
Rio Upgraded by Moody’s
The City of Rio de Janeiro has been upgraded by Moody’s to Baa2 from Baa3. Indicators of sustainable fiscal performance and spending control are among the factors leading to the upgrade. The raise follows Fitch’s assignment last week of a BBB rating to the city, citing the federal government’s role as Rio’s main creditor and its 1999 refinancing agreement, among other factors. Both Moody’s and Fitch have stable outlooks on Rio.
Santander Chile Pops after Well-Bid FO
Santander Chile Shares rose nearly 10% in their first session following a well-bid $949m follow-on, reflecting the transaction’s 2x-plus demand. It sold 14.74bn shares, represented by 14.19m ADS, at CLP33.00, or $66.88 per ADS, to bring in a total of CLP486.47bn ($949m). The price was slightly higher at $66.58 at Tuesday’s close, and the shares rose 9.45% Wednesday to $72.87. The deal saw $2.01bn in competitive demand from 2,041 accounts, Santander Chile says. Foreign ADS buyers accounted for 65.02% of the offer, with local pensions and institutions getting 20.00%, foreign institutions buying local shares getting 7.94%, local retail investors 3.52% and retail ADR buyers 3.52%. In all, about 70% of the buyers were international, which bankers say is much higher than their the one third foreign participation normally seen in Chilean deals. Analysts initially expressed skepticism about the strength of demand, but bankers say a 7.4% drop in share price between the deal’s announcement and Tuesday may have lured buyers who always considered the bank a quality asset. Santander’s decision to extend the lockup period to 1 year, also helped, bankers say. The deal, sold through the Teatinos Siglo XXI Inversiones vehicle, represents 7.8% of the Chilean unit, which now has a 33% free float, up from 25%. Santander, Bank of America Merrill Lynch and Credit Suisse managed the international portion, while Santander and LarrainVial handled Chilean orders. The sale was somewhat overshadowed by the announcement late Tuesday of Santander’s complete pullout from Colombia, another part of the plan to cover a EUR6.47bn ($10.08bn) capital shortfall to meet new capital requirements imposed by European regulators. The bank has said it will retain earnings and sell assets in order to raise its core capital ratio to 10% from about 8% by June. It is also seeking to sell up to 8.2% of the Brazil unit, which could bring in as much as $2bn. The next sale in Chile’s market is the government selldown
Urbi Poised for Local Bond Sale
Urbi Desarrollos Urbanos (URBI) is expected to price up to MXP1bn ($74m) today in the Mexican domestic bond market. Price talk for the Mexican homebuilder has widened out to TIIE+370bp-380bp area, from an earlier indications of TIIE+350bp. Proceeds will be used to refinance existing long-term and short-term debt. With the proposed issuance, Urbi will have no substantial debt maturities until 2014, says Moody’s, which rates the deal A3 on a national scale. BBVA is managing the sale. Urbi last visited the bond markets in January 2010, issuing $300m in a cross-border sale.