Brazilian concession operator Invepar is still planning to hold an IPO, once market conditions get better, Nathaniel Wendling, director of corporate finance at parent OAS, says. “The IPO process should be in full force anytime in the next six months or so. We are just waiting for the market window to reopen,” the official says, speaking on a panel at the LatinFinance Latin America Korea Investors Forum in Seoul last week. Banks have been hired, but he would not disclose them. IPOs for other OAS divisions, in real estate, sports arenas and sanitation could also be possible in the long-term. Each is in a different stage of maturity, but could be a candidate to come to the market during the next several years, as they gain more scale. At the moment a handful of Brazilian issuers have documents ready for deals, but conditions remain tricky. Currency appreciation and other macroeconomic factors are challenging, Wendling says, but deals should be examined on a case-by-case basis. “If you look for stories that have a consistent track record and clear growth strategy, these are the names that will be first out of the box when the market reopens,” he says.
Category: Equity
Gener Seeks Equity Capital
AES Gener is preparing to raise $450m in new equity, it says. The matter will be approved at a shareholders’ meeting October 3. The Chilean generator expected to use proceeds to finance projects, such as the Alto Maipo hydroelectric plant and the Cochrane coal plant project.
Volaris Lands IPO at Bottom of the Range
Mexico’s Volaris should raise almost $400m from its IPO after pricing Tuesday night at the bottom of the range. The demand was said to reach more than 1x Tuesday afternoon. The issuer priced its ADS, representing 10 common shares, at $12.00 each, suggesting a $398m size if a 15% greenshoe is used. Volaris was to sell the equivalent of 173.1m primary shares and 115.3m secondary shares, not counting the greenshoe, with about 75% expected to be sold in an international tranche in the form of ADS and 25% in Mexico. The exact breakdown was not immediately available Tuesday night. Though coming at the smaller end of expectations, the deal is completed against an uncertain global market backdrop, at a time when investors are particularly skeptical of airlines. “The market is not great for airlines at this time. Oil prices are very volatile,” says Bianca Faiwichow, an analyst at GBM. A growing middle class and rising incomes offer the potential for increased demand for air travel in Mexico, she says. However, the low-cost business model has not yet proven to be as strong as in the US, as it is more vulnerable to changes in the economies in markets such as Mexico and Brazil. Volaris plans to use proceeds for general corporate purposes and to repay loan debt. Deutsche Bank, Morgan Stanley, UBS, Evercore and Santander managed the transaction, joined by Barclays and Cowen on the international portion. It remains to be seen if Colombia’s Avianca-Taca and Chile’s Latam is encouraged enough to move ahead with follow-on plans, and if the group of Brazilian IPOs in the pipeline chose to launch in the September-October window.
Avianca Sounds Out Investors
Avianca-Taca is heard holding pre-education meetings this week with equity investors, ahead of a possible follow-on sale of ADR. Citi and JPMorgan are managing. The Colombian airline has said it is studying the possibility of an ADR offering, “depending on conditions in the international markets.” Mexico’s Volaris, scheduled to raise more than MXP5bn ($386m) in an IPO pricing Wednesday, should provide an indication of investor appetite for airline equity. Chile’s Latam has also been authorized for a follow-on. Brazil’s Azul put off an IPO earlier this year.
SMU Lowers Equity Sights
Chile’s SMU has approved a $251m equity capital raise, it says, an amount lower than the $300m it originally had in mind. The retailer is raising funds and selling assets to shore up finances, after it revealed in July reporting errors that showed it had breached debt covenants. SMU bondholders agreed last month to grant a waiver for the covenants, in exchange for a fee equivalent to 1.0% of the face value of their debt. SMU has also agreed to take out a subordinated credit for $300m before the end of the year and is discussing the sale of $300m-$400m in non-core assets.
CCU Sets FO Price
Compania Cervecerias Unidas (CCU) has concluded the first step in an equity follow-on that should raise CLP331.5bn ($655m), setting the price at CLP6,500, according to regulatory documents. The Chilean beverage company has sold 22.6m shares, representing rights to shares waived by controller IRSA, and now opens a 30-day preferential rights period for existing holders to buy the remaining 28.4m shares. The price represented a 3.0% discount to the previous CLP6,702.60 closing price. Shares closed at CLP6,667.00 Friday. Demand reached CLP645bn from 515 accounts. About 38% of the shares was allocated to international buyers in the form of ADR, 37% to Chilean pension funds, and the remainder to other types of investors. IRSA, owned equally by Heineken and the Luksic family’s Quinenco vehicle, are expected to control 60% of the company post-float, with the market holding the rest. CCU is raising funds for organic growth and acquisitions. JPMorgan, Citi, Deutsche Bank, and Goldman Sachs are managing the international portion, and BanChile and LarrainVial are handling the local portion. CCU in a June meeting agreed to a capital increase of up to CLP340bn.
Bolsa Readies for Next Hotel Operator
Grupo Hotelera Santa Fe plans to become the latest Mexican hotel operator to hold an IPO, according to offering documents. The size and timing remain to be set for the deal that features primary as well as secondary shares sold by existing shareholders. Developer Grupo Chartwell and private equity funds Walton Street and Nexxus are the main owners. Santa Fe is raising funds to repay debt and for expansion. Barclays and JPMorgan are managing the international portion, and BBVA and Santander the Mexican portion. Santa Fe operates 10 hotels in 5 Mexican states, including a mix of city and beach resort properties, under brands including Hilton, Hampton Inn, Hyatt and Krystal. The issuer reported MXP1.05bn ($80m) revenue last year. It would follow City Hoteles and the Fibra Inn and Fibra Hotel trusts in going public in the past year. Next up in the Mexican pipeline is the IPO of airline Volaris, scheduled to price Wednesday.
GeoPark Looks for Equity to Fund Expansion
Chilean-based oil and gas explorer and producer GeoPark is considering an SEC-registered IPO to raise funds for expansion, according to a prospectus. The size and the timing have not been set. GeoPark operates in Chile, Brazil, Colombia and Argentina, and plans to use funds for acquisitions in the first three countries, as well as for organic growth and general corporate purposes. An acquisition in Peru is also a possibility, the company says. The issuer booked $84m in adjusted Ebitda in 1H 2013, up from $70m in 1H 2012, after getting $121m in all of 2012. BTG Pactual, Itau and JPMorgan have been hired to manage. GeoPark hit the bond market in February, raising $300m in 2020 NC4 bonds through the GeoPark Latin America unit.
Batista to Fight OGX Put
Fitch downgraded OGX Monday after controller Eike Batista challenged the $1bn put option exercised by the firm last week. Though it was unclear if the billionaire was able or willing to fund the put option exercised by the cash-strapped oil company last week, markets had taken the news positively. Batista said Monday he would legally challenge the option within 60 days. “I note my rights under the contract and under the law to question the circumstances, the form, the content, the validity and other legal aspects of the planned exercise of the option,” Batista writes. He was to pay $100m immediately and the remainder as needed. Batista’s wealth is now estimated to be less than $1bn. Fitch lowered OGX to C, from CCC, to “reflect the company’s imminent default given its extremely tight liquidity position, and the need for significant capital expenditures to increase production output and operating cash flow.” The agency says OGX had BRL722m ($317m) cash in June, and will run out by the end of the year. OGX 2018 bonds traded at 18%-20% of par Monday, according to a trader. A group of at least six OGX bondholders representing more than half the $3.6bn outstanding in 2018 and 2022 bonds has hired Cleary Gottlieb, Pinheiro Neto and Rothschild to advise. Blackstone is advising OGX. No formal restructuring offer has been announced. Analysts have suggested a bondholder haircut would be necessary, possibly involving creditors receiving equity.
Surprise OGX Put Not Seen as Solution
OGX surprised the markets announcing a plan to exercise a $1bn put option with controller Eike Batista, though it remained unclear to analysts to what extent the put would help the struggling oil company. The move, which Batista had not been expected to afford, calls for $100m immediately, which could buy the borrower time as it stares down a depleted cash pile and a likely restructuring. It remained unclear, however, when OGX would receive the remaining $900m, and whether the exercise is part of negotiations with USD bondholders or a preemptive move to avoid such a restructuring. “If he does put in $1bn, it resolves quite a few issues, and buys them a bit of time – one may even argue that a restructuring is no longer a necessity in the near term,” Revisson Bonfim, executive director of LatAm Corporate Research at Espirito Santo Investment tells LatinFinance. The initial $100m could buy a couple more months, he says, through OGX will still have to address creditors. OGX faces bond interest payments of about $40m in October and $100m in December. Batista could use cash from various asset sales – recently including 11.4% of OGX shares and a controlling stake in the LLX logistics business – for additional contributions, though it is unclear to what extent those proceeds are being used for other commitments within the EBX group. “It is surprising, but I’m not sure much will change in the end. Most likely Batista doesn’t have any money to honor the put,” Omar Zeolla, credit analyst at Oppenheimer Funds, tells LatinFinance. The latest estimates put Batitsa’s wealth at less than $1bn. The put requires Batista to buy shares at BRL6.30 ($2.74) each. The shares closed at BRL0.52 Friday. The bonds were seen trading in the low 20s Friday. A group of at least a half dozen OGX bondholders representing more than half the $3.6bn outstanding in 2018 and 2022 bonds has hired Rothschild, Cleary Gottlieb and Pinheiro Neto to advise. Blackstone is advising OGX. There has been no formal