A repricing of emerging market debt and equity which has shaken markets is set to continue, bankers and investors fear. Mexican equity transactions were battered by choppy markets last week, although bond issues managed to proceed. Latin America’s financial markets will continue to see volatility, gappy price action and thin liquidity, keeping most debt capital markets primary issuance sidelined until more clarity is seen in the markets, especially in US treasury yields, bankers say. Market focus will be on non-farm payroll numbers Friday, and bankers expect a pickup in the US high-grade bond market before primary issuance is seen in emerging markets. Volatility impacted Mexico’s equity markets last week, prompting construction firm Empresas ICA to shelve a secondary offering of Grupo Aeroportuario del Centro Norte (OMA) shares. Corporacion Inmobiliaria Vesta’s follow-on equity sale came in MXP2.49bn ($189m) less than planned after one secondary seller opted out. Banco de Chile, however, managed to sell its third Swiss franc bond, raising CHF125m ($133m) despite fears over mounting volatility. Four Mexican borrowers also jumped through a narrow issuance window last week, though some adjusted their transactions to fit the conditions. “It is hard to characterize the market as stable, but the market has made some progress,” says a senior syndicate banker. US Treasuries yields closed Friday flat on the week at 2.52%, having retraced from this year’s high of 2.6% on June 25. Outflows of $5.5bn from EM debt funds in the week to June 26 exacerbated a sell-off as investors adjusted expectations on the US Federal Reserve’s plan to taper asset purchases. Nevertheless, bankers and investors remain hopeful for a swift recovery. “The sell-off doesn’t have to do with a shift in underlying growth or inflation fundamentals, and hopefully we will get a period of stability which will calm investors and change the more negative dynamic seen over last couple of weeks,” says a senior E
Category: Equity
US data, markets to drive LatAm issuance as pipeline forms
Friday’s non-farm payroll data will be watched carefully, bankers and investors say, as the issuance pipeline builds amid a choppy outlook for Latin debt and equity markets.
CPFL Targets over BRL1bn in IPO
CPFL Energias Renovaveis has detailed its plans for another crack at the IPO it first filed documents for in 2012. The IPO will comprise 28m primary shares and 44m secondary shares, to be priced between BRL12.51 and BRL15.01, meaning the deal could raise BRL900m–BRL1.08bn, or up to BRL1.24bn if the 15% greenshoe is exercised. Global coordinators Bank of America Merrill Lynch, BTG Pactual and Itau BBA will take orders between July 4 and 16. The shares will be sold domestically and in the US through a RegS/144A offering. Cash from the primary portion of the IPO will go to existing developments and new projects. Nine entities are selling shares in the secondary offering, including parent company CPFL Geracao, which will cut its holding to 57.6%, from 63%, if the greenshoe is exercised. Previ, Brazil’s largest pension fund, has committed to buying 32m shares at BRL12.51 a piece. BTG is backstopping the deal with a guarantee to buy 40m shares – 55.6% of the deal – at the same price.
Vesta CEO: Pricing Pressure on Follow-On
Lorenzo Berho Corona, CEO of Corporacion Inmobiliaria Vesta, says the company had been looking for better pricing in Tuesday’s follow-on equity offering, but it decided to proceed with the deal to take advantage of a narrow issuance window. “There was a pressure on price on the day of placement. But we built a strong book which was 2x oversubscribed,” he says. Investors bought close to 98m primary shares and 12.8m secondary shares at MXP22.5, a 4.9% discount to Vesta’s MXP23.67 closing price. The issuer decided to go ahead given the quality and quantity of investors willing to participate. The sale of secondary shares was smaller than the 44.5m initially planned, after the real estate investment arm of German savings bank Deka decided not to sell its stake. The rest of the secondary portion came from DEG, a private sector financing arm of German development bank KfW, which went ahead with its sale. The deal was allocated 48.8% in Mexico and 51.2% in the international markets. Credit Suisse and Santander managed the transaction.
Cover Story: The writing on the wall
Fears are growing that an era of cheap and easy credit for emerging market companies and nations has drawn to a close. What comes next is unlikely to be pretty
Power and Renewables Brazil: Sweet dreams
Brighter forecasts and new measures from Brazil’s government should help sugar and bioenergy producers, which have been pinched in recent years
Metals & Mining: Beyond the deep
Miners across Latin America are scaling back capex and looking further afield for funding as they keep an eye on the longer term amid falling prices for metals
Best Corporates: Seize the moment
As they stare into a choppy horizon, the top Latin companies in the capital markets show the importance of grabbing opportunities when they arise
Equity: Change of pace
The equity capital markets pipeline was refilling after a busy March-April window that finished with bangs including Brazilians BB Seguridade raising 11.48 billion reais ($5.74 billion) and Smiles raising 1.13 […]
Latam Airlines Mandate for Follow-On
Latam Airlines has mandated JPMorgan as global coordinator and BTG Pactual and Credicorp Capital as joint bookrunners on its $1bn equity offering. The board approved the issue of 63.5m shares earlier in the month, to raise funds for fleet enhancement, financial development, executive compensation among other uses. The firm’s shares were trading at $16.10 Wednesday. Given equity markets are set to stay quiet until early September, the transaction is unlikely to proceed until after the summer, LatinFinance understands. The airline, formed after the merger of Chile’s Lan and Brazil’s Tam in June 2012, is rated BB by S&P.