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.
Category: Daily Brief
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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Infonavit Preps First Mexico RMBS of Year
Mexican government mortgage lender Infonavit is planning a sale of MXP5.69bn of its Cedevis RMBS, in what should be the first local RMBS sale of the year. The 2036 bonds will be denominated in UDIs and split into MXP2.85bn tranches amortizing one after the other and paying a fixed interest rate. Infonavit is targeting March 10 for the sale, according to regulatory documents. Banamex and HSBC are managing the transaction, rated AAA on a national scale. Infoanvit and fellow government lender Fovissste have propped up the Mexican RMBS market since the crisis all but wiped out issuance from private lenders. Infonavit priced MXP2.53bn in UDI-denominated RMBS in November at 5.4%, also through Banamex and HSBC.
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OSX to Brave IPO Waters
In the midst of rough market conditions that have resulted in pulled deals and rocky pricings, OSX, Eike Batista’s oil and gas shipping unit, has filed for an IPO via Credit Suisse and Itau BBA. The company had previously filed a charter stating its board had authorized an equity capital raise of BRL10bn. In another recent development, OSX has picked Hyundai, the Korean industrial that specializes in offshore platforms, to be a partner in OSX. Hyundai is taking a minority stake in exchange for helping assemble a shipyard in the south of Brazil. OSX is likely to count substantially on financing from the BNDES to build the facility, according to executives close to the startup. In addition OSX, which is operating at a loss, will look to the bank market and private investors for additional capital to build up facilities and projects, it says in the prospectus. It also notes that EBX, Batista’s holdco, can provide guarantees to back financing.