Despite the impact of souring global markets on risk appetite, Banco Cruzeiro do Sul is preparing to price at the end of this week a new 5-year bond. The Ba2 mid-sized Brazilian bank has not communicated the size, but is heard aiming to do at least $250m in the high 8% yield range. The issuer held meetings with a few investors in Europe and the US last week. BCP and BTG Pactual are managing the 144a/Reg S sale. Cruzeiro sold $175m in 2012 bonds in September to yield 8.5%, also through BCP. It is pushing tenor further than high grade Banco Votorantim, which last week succeeded in raising $500m in 2013 Baa2 notes priced at 99.563 with a 4.25% coupon, to yield 4.375%, in line with 4.375% area guidance. Demand hit $750m, according to bankers managing the sale.
Category: Daily Brief
Ecorodovias IPO Bets on Infrastructure Bid
Tollroad operator Ecorodovias – which last week filed plans for an IPO of up to BRL2bn – is betting on a strong bid from equity investors seeking exposure to Brazil infrastructure. Local and foreign equity buysiders say infrastructure companies are attractive, though relatively scarce. “There’s a lot of interest in infrastructure companies,” says Fabio Russo, CFO position at commercial developer Sao Carlos. Road concessions and railroads in particular are a draw, he says, noting that lack of proper transport infrastructure creates bottlenecks for Brazil’s expanding crop harvest. Russo was until last month a finance executive at Ecorodovias comp CCR, the publicly listed roads operator. He points to robust performance by Brazil’s listed road concessionaires. Triunfo Participacoes rose 460% in 2009, OHL Brasil was up 165% in the year, and CCR jumped 78%, he notes. The Ibovespa rose 70% last year. “I like [Ecorodovias’] assets and the company’s management is also very good,” says Russo. “Within the context Brazil finds itself in today and the outlook for the next 5-10 years, there’s one sector that could bring new companies and that’s infrastructure,” says Herculano Anibal Alves, head of equity at Bradesco Asset Management, which manages stock portfolios worth a combined BRL17bn. He was speaking in December in reference to the issuance calendar for 2010. “There’s money out these for these companies,” he adds, noting also that there are no heavy construction builders listed on the Bovespa. In light of upcoming builds for the World Cup and Olympics, demand for roads, airports, ports and facilities will be intense. Ecorodovias, which manages tollroad concessions, will comp to CCR, which also manages concessions for roads and mass transit lines. Anibal adds that firms like Camargo Correa, Odebrecht, OAS, Andrade Gutierrez, as well as cement companies, of which he says there are none that are publicly listed, would make welcome candidates for investors. Another infrastructur
Outflows Continue For GEM Funds
GEM equity funds lost $981m in the week ended February 3, hitting a 59-week outflow high, says Morgan Stanley, which cites EPFR Global data. LatAm equity funds meanwhile enjoyed inflows of $175m in the week. Both had recorded outflows of $716m and $222m the previous week, respectively. Performance also took a beating, Lipper says, with LatAm funds shedding 3.59% in the week ended February 4 and dropping a hefty 12.73% ytd. This is the highest ytd drop of all equity funds Lipper tracks. Meanwhile, EM funds lost 1.65% in the week and 6.36% ytd. Global small and mid-cap funds lost 2.00% in the week and 4.47% ytd.
EM Bond Funds Lure Cash
EM bond funds attracted $406m in flows on the week ended February 3, says Morgan Stanley, which cites EPFR Global data. However, flows into funds investing in riskier local currency debt fell to around half the total inflows, compared to over 95% the previous week, adds the bank. Performance was negative, however, with Lipper data showing EM debt funds down 0.23% for the week ended February 4, but unchanged year-to-date. Global income funds dropped 0.11% in the week and are up 0.71% ytd while international income funds dropped 0.47% in the week and 0.03% ytd.
Grupo Mexico Buys Drilling Company
Grupo Mexico says it has acquired engineering company Compania Perforadora Mexico (Pemsa) for $240m as part of its strategy to increase its participation in the infrastructure sector. A company spokeswoman declines to say how it is financing the deal or if it had outside financial advisors. Pemsa, which has provided drilling services for Pemex for 49 years, had $91m in 2009 revenue and Ebitda of $30m.
Brazil’s Romi Offers to Buy Hardinge
Brazilian tool manufacturing company Industrias Romi says it has offered to acquire New York state based Hardinge for $8 per share in cash, or about $93m. Romi had made the same unsolicited offer December 14, but was rejected. It says the offer represents a 63% premium to Hardinge’s share price at that date. On February 5, Hardinge’s shares closed at $8.07. Hardinge says its board will evaluate the proposal with financial advisor Jefferies & Co. and legal advisor Wachtell, Lipton, Rosen & Katz. Romi’s financial advisor is HSBC Securities and Shearman & Sterling is its legal counsel.
Advent Scraps Meal IPO Plans
International Meal Company (IMC), the pan-Latin restaurant chain owner, has given up on pricing a BRL800m+ IPO. Following a postponement of a float mid-December, the company has issued a statement formally withdrawing its bid to issue shares. “The company wouldn’t have come back in this kind market,” says an executive close to the process. Observers on and off the trade thought IMC had pushed its luck by trying to squeeze in the planned BRL830m offering so close to Christmas. The company might have succeeded in pricing last month, says one sellsider watching the process, though there is little chance a deal could have come in the past 3 soft market sessions, he adds. IMC joins Metalfrio and M. Dias Branco in opting to shelve issuance plans. Credit Suisse, Itau BBA, Santander and Bradesco BBI were slated to lead IMC.
Multiplus Sags in Trading Debut
Investors dumped shares of TAM mileage program manager Multiplus Friday, the first day of trading for the company that priced an IPO last week. Shares of the debutante sank 9.4% Friday, underperforming the Ibovespa which closed 1.8% lower. The company priced at BRL16.00, 24% below the midpoint of its targeted range. Proceeds totaled BRL724m, including a greenshoe. A New York-based LatAm equity investor says the company should be pleased it priced at all, and notes had it waited another day, it may have not made it out. Brazilian issuers are 2 for 2 so far this year in grossly undershooting their targeted pricing ranges. Aliansce, the shopping mall manager, priced its IPO 22% below its targeted midpoint. In addition 3 others have canceled deals, including M. Dias Branco and Metalfrio, both for follow-ons, and IMC which chopped an IPO on Friday.
Costa Verde Seeks Capital Increase
Chile’s Costa Verde Aeronautica, which has a 25% stake in local airline LAN, says it has decided to pursue a $1bn capital increase through the issuance of 500m shares. Equity analysts in Chile covering LAN believe the capital increase will be used to acquire a 26% stake in the airline held by Axxion and Inversiones Santa Cecilia. The latter are controlled by president-elect Sebastian Piñera. Costa Verde does not say what the funds will be used for. Simultaneously, Axxion’s shareholders have authorized the sale of its 19% stake in LAN, but do not say who the stake will be sold to.
Pemex Broadens Investor Base
Being the only Mexico deal in town so far this year, Pemex says it capitalized on tremendous excess liquidity with last week’s bond issue. It sucked in more than 250 orders for MXP36bn worth of new bonds, its finance manager says. “The fact that there haven’t been any deals recently in the local market really helped to create the demand we saw yesterday,” Mauricio Alazraki, MD of finance at Pemex, tells LatinFinance. “It paves the way for other issuers to come to the market,” he adds. The MXP15bn sale was divided into a MXP8bn 5-year floater paying TIIE plus 70bp, a MXP5bn 10-year fixed piece paying 9.10%, and a MXP2bn UDI tranche paying 4.20%. He credits this 3-tranche structure – Pemex had not done an UDI-denominated offer since 2004 – with helping to expand the investor base. Pemex has a goal of $2.8bn net indebtedness for 2010, he says, of which MXP20bn-MXP40bn should come from domestic markets. In January, it sold $1bn in 2020 bonds to yield 6.126%. “We always want to be earlier in the [international] market. But there is no rush. We printed $1bn, and that was the right size,” says Alazraki. “It’s likely we will go again to international markets, either dollars, Euros, sterling or wherever we see a good opportunity,” he adds. For Pemex, the local market is a little more attractive in terms of price at the moment, though the company plans to borrow significantly from both this year, says the official.