It’s shaping up to be a slower first half of January than usual in LatAm DCM, with uncertainty about external conditions keeping issuance volume well below last January’s seasonally brisk spree. High-yield issuers appear to be waiting to see what pricing Brazilian steelmaker Usiminas is able to get on a $400m 2018 notes issue. The Baa3/ BBB- deal is now roadshowing, taking in Los Angeles, New York, Boston and London, with pricing expected as soon as Friday. Bankers away from the transaction, led by JPMorgan and UBS expect a yield in the low 7% area, owed to the issuer’s strong name and low outstanding debt. If the market opens up, other high-grade frequent issuers could follow, notes one banker, while the high-yield deals yanked late last year may continue to wait. Sovereigns are in no hurry, the banker adds.
Category: Bonds
Usiminas Preps $400m Bond Sale
Brazilian steelmaker Usiminas is taking the opening crack at LatAm cross-border DCM, which is otherwise dead as bankers slowly get back to work amid tricky market conditions. A roadshow starts today for the sale of up to $400m in 2018 144A/Reg S bonds. The exact sale date remains to be set. The high-grade issuer has said it plans to raise at least $3bn over the next two years to fund basic capital expenditures and manage the balance sheet. The Baa3/ BBB- deal is led by UBS and JPMorgan.
Dresdner Shutting Down New York DCM
Dresdner Kleinwort is effectively closing down its New York-based DCM business, save for a few sales and trading people. It is shifting resources closer to local markets, according to executives formerly with the firm. The change appears to reflect an internal decision to exit unprofitable businesses around the globe – including the US bond business – and reduce headcount in DCM. The German bank is heard to have pared down its eight person LatAm DCM team to four through layoffs. The remainder in New York will join local bankers and the practice for the entire region will be run out of Sao Paulo, according to people familiar with the matter. Carlos Rosso, a DCM originator based in Mexico, and Glenn Peebles, in charge of Brazil origination, will both continue at their posts, with the latter expected to preside over a Dresdner expansion in Brazil. DCM veteran Enrique Bustamante, head of LatAm corporate finance based in New York, was laid off. Rodrigo Gonzalez, a DCM originator also based in New York, is heard still with the team and may move to Sao Paulo. In August, Dresdner set up a LatAm M&A practice in Sao Paulo, with Gabriel Nores running the advisory effort and Eduardo Bertao, a Brazilian formerly based in London, focusing on the utilities sector. A Dresdner spokeswoman declined to comment.
LatAm DCM Bucks Global Negative Trend
Bankers got $433m in DCM revenue in 2007 from LatAm and the Caribbean, according to Dealogic. This was a 12% increase from 2006. The region’s DCM volume was also up slightly, at $79.2bn in 2007 from $74.9bn in 2006. Mexico finished the year strongly, with Q4 volume up 105% over 3Q, lifting its 2007 total to $26bn. The region’s numbers are in contrast to an 8% drop in 2007 global DCM volume, to $6.06trn. Despite raising a record $3.96trn through June, a rough second half saw only $2.10trn, a 47% drop from the first half and the lowest half-year volume since 2002. Global DCM revenue totaled $22bn, almost flat to the $22.1bn in 2006. EM volume fell 7% in 2007 to $2.17trn, while revenue dropped 3% to $7.5bn, following a dramatic second-half slowdown where EM volume dropped 53% to $688.1bn from the first half.
Gigante to Buy Back $237m in Bonds (1)
Mexican retailer Grupo Gigante plans to buy back $237.6m of its 8.75% 2016 senior notes, tendered for in a buyback offer worth $260m. Also last week, Gigante shareholders approved the sale of 206 supermarkets to rival Organizacion Soriana for $1.35bn. Gigante is refocusing its business on real estate, its Toks restaurant chain, and joint ventures it has with RadioShack and Office Depot.
HSBC Promotes Mato to Run EM Financing (1)
HSBC has appointed LatAm veteran Gerardo Mato to head of financing and advisory for the emerging markets. He will run advisory, equity and DCM in EM, while also leading the origination efforts of the domestic global markets teams in the region. Mato will also retain oversight for the liability solutions group in the Americas. He will report to Rod Prat and Jose Luis Guerrero, co-head of global markets, Americas. LatinFinance hears that HSBC is planning a number of high profile hires in LatAm in the short term.
Gigante to Buy Back $237m in Bonds
Mexican retailer Grupo Gigante plans to buy back $237.6m of its 8.75% 2016 senior notes, tendered for in a buyback offer worth $260m. Also last week, Gigante shareholders approved the sale of 206 supermarkets to rival Organizacion Soriana for $1.35bn. Gigante is refocusing its business on real estate, its Toks restaurant chain, and joint ventures it has with RadioShack and Office Depot.
HSBC Promotes Mato to Run EM Financing
HSBC has appointed LatAm veteran Gerardo Mato to head of financing and advisory for the emerging markets. He will run advisory, equity and DCM in EM, while also leading the origination efforts of the domestic global markets teams in the region. Mato will also retain oversight for the liability solutions group in the Americas. He will report to Rod Prat and Jose Luis Guerrero, co-head of global markets, Americas. LatinFinance hears that HSBC is planning a number of high profile hires in LatAm in the short term.
Moody’s Lifts Bladex Rating
Moody’s has upgraded Bladex to Baa2 (stable) from Baa3 because of increasing core profitability, earnings diversification, and improving asset quality. It also likes the management’s strategy to broaden the bank’s activities in trade finance and securities business in the LatAm and the Caribbean. “The addition of value-added products such as factoring and leasing is expected to leverage management’s relationship, product and risk assessment capabilities and lead to increasing profitability over time,” says Moody’s. “The bank’s liquidity and funding structure has also been strengthened by growth and diversification in its deposit base and by increasing access to longer term funding from banks and official institutions,” it adds. Risks include high competition in core businesses and relatively thin margins and fees that reflect the bank’s emphasis on high quality names and the predominantly short term trade finance-related nature of its business. “Another important risk factor is the bank’s dependence on wholesale funding, though this risk is partly mitigated by its predominantly short term loan book and emphasis on liquidity management. In light of currently stressed financial conditions in the global markets, should these continue, Bladex could be subject to higher funding costs,” adds Moody’s.
Bogota to Borrow $100m for Infrastructure
The District of Bogota has received Colombian government approval for $100m in loans from CAF and the IFC and awaits the final approval from the multilaterals. “We expect to have final approval by year end,” Rigoberto Lugo, the city’s public credit director, tells LatinFinance. “With the multilaterals, we are able to obtain funds at competitive terms to complement the $300m raised in the international capital markets this year.” A $55m loan from CAF and $45m loan from the IFC pay 125bp over Libor. Proceeds finance part of a $500m infrastructure program in Bogota, making improvements to roads, schools and hospitals. In July, Bogota sold $300m in 2028 TES-denominated bonds via Deutsche Bank and Citi.