Brazilian ECM Shows Life with TIM Follow-on

Brazilian wireless operator TIM has raised BRL1.72bn ($925m) in Brazil’s first equity deal since July, though bankers and investors doubt the follow-on signals a revival. TIM placed 200.3m primary shares, including a 9.5m share greenshoe, at BRL8.60 each, according to the CVM, representing a 0.92% discount to Tuesday’s BRL8.68 closing price. Parent Telecom Italia had indicated it would exercise its rights to 66.94% of the sale, meaning only about a third of the deal hit the markets and filling the books was not a huge concern. “This wasn’t going to be a difficult deal to place, as the parent is taking its share,” says a New York-based ECM banker away from the deal. He notes that the deal unfortunately doesn’t signal a revival for Brazilian issuance, due to the poor performance of the Bovespa and global equity markets, as well as the challenges issuers were already facing this year to get the prices they wanted. Analysts had called the follow-on unnecessary, citing TIM’s low debt levels. The wireless operator is raising funds to expand its infrastructure, after having spent BRL1.6bn in the July purchase of broadband provider AES Atimus. Itau and Morgan Stanley managed the follow-on. There are no other Brazilian deals that are launched at present, with several issuers pulling their initial filings in recent weeks. Bankers are optimistic that maybe a few new deals could still arrive in 2011, though investors don’t see them pushing clients out in current conditions, with the Bovespa having lost 25% year-to-date. “The pipeline is huge, but nobody is going to look at a new deal with [secondary market] prices at levels like this,” says a Sao Paulo-based investor.