Despite a slowdown in new equity issuance caused partially by international investor risk aversion, ECM bankers and issuers are optimistic that New York-listed 144a deals can become a regular option once the markets reopen. This comes as Colombia’s Grupo Suramericana changed a planned international and domestic offering to local only. The COP3.9trn ($2.09bn) deal launched this week, in a market that has kept going precisely because of its insulation from international sentiment. Nevertheless, perhaps encouraged by Arcos Dorados’ recent $977m follow-on, most are convinced the window will reopen, with New York offering transparency and safety to issuers, particularly pan-regional names. It would make sense for issuers in most countries, though there is debate about whether it is in Brazilians’ best interest. “Increasingly you see more interest in the potential for a New York listing. Issuers, and Brazilians in particular, are interested in being seen as having the high-quality accounting” says a senior banker at a shop on the Arcos Dorados deal. Others disagree, noting that Brazilian issuers might find sufficient liquidity at home, and for a significantly lower cost. “If you are Brazilian, Brazil is the best bet for a combination of international investors and a cheap listing. But for ex-Brazil issuers, New York makes all the sense in the world, especially with the current volatility,” says a New York-based ECM banker. There is a consensus that a 144a makes sense for recognizable pan-regional names, and for those in complicated neighborhoods, such as Argentina’s YPF, which raised a $1.23bn follow-on earlier this year. In the New York pipeline before the markets shut down were Argentines Alto Palermo, Santander Rio and Banco Supervielle. Colombians Grupo Aval was also considering offerings. If a window opens up, bankers note that 3Q numbers are good until the third week of February, after which time prospective issuers would be looking at March or April window.
Category: Equity
Tenaris Scraps Confab Delisting
Tenaris has decided to withdraw its request for a Brazilian equity tender offer for all of the shares of its Confab subsidiary that it does not own. The steelmaker controlled by Argentina’s Techint had submitted and offer in August to pay BRL5.20 ($2.97) per Confab share, but Brazilian law allows for a 10% minority to challenge the valuation, which a group did this month. Tenaris has held a controlling stake in Confab, which operates under the TenarisConfab brand, since 1999.
OSX to Split Shares
Brazilian shipbuilder OSX has approved a proposed 1-for-25 share split. Each OSX common share is to be represented by 25 new ones once the operation is completed, with the split shares beginning trading today. The EBX unit’s shares closed at BRL368 ($220) Monday.
Sura Launches FO
Colombia’s Grupo de Inversiones Suramericana has launched a COP3.9trn ($2.09bn) domestic equity follow-on, seeking funds to pay for its acquisition of ING’s LatAm pension fund and insurance assets. The conglomerate is selling 120m preferred non-voting shares at COP32,500 each, during an order period closing November 22. The price represents a 3.1% discount from the COP33,545 moving average price during the month prior to Sura’s board’s approval of the sale, and a 0.85% discount to Monday’s COP32,780 close. The deal is local only, though some international participation is expected. This marks a change from the issuer’s original plan to combine domestic and 144a issue. As a result, the borrower has reduced the larger line-up of banks mandated on the original deal, leaving just Bancolombia and Santander as leads. The list had also included acquisition bridge loan lenders BBVA, Deutsche Bank, HSBC, JPMorgan, and UBS. Meanwhile in Colombia’s busy ECM, Empresa de Energia de Bogota is set to allocate its COP700bn ($360m) follow-on as soon as this week, and Davivienda is raising COP480bn-COP800bn ($253m-$422m) in a follow-on closing next week.
Following on
Bankers hope equity issues will spring back to life next year, but in October they continued to commiserate over the poor state of a market that is one of their […]
LatAm Equity Lags Rebound
EM equity funds had inflows of $1.48bn in the week ended October 26, though LatAm equity funds lagged, with outflows of $137m, according to EPFR. As global markets lifted on European debt agreement news, EM equity funds were up 9.66% during the week ending October 27, according to Lipper, for an 11.98% loss ytd. Similarly, LatAm funds gained 10.29% for a ytd loss of 13.50%. Global small and mid-cap funds were up 8.18%, and are down 5.82% ytd.
EEB FO Fills Book, Set to Upsize
Empresa de Energia de Bogota’s COP700bn ($376m) equity follow-on has seen orders of 1.3 times that amount after books were recently closed. The utility is expected to upsize the deal to about COP770bn, according to a person familiar with the transaction. The Colombian utility offered 538.5m shares at COP1,300 each. EEB plans to use the proceeds to fund its expansion plans. Corredores Asociados is lead manager. EEB Shares closed Friday at COP1,325.
Sura Set to Test Colombia ECM Mettle
With follow-ons from blue chips such as Empresa de Energia de Bogota and Davivienda filling their books, Colombia’s equity market is set be tested with a large deal from Colombia’s Grupo de Inversiones Suramericana. The financial conglomerate has filed to sell 120m shares, which would raise COP4.07trn ($2.19bn) at Friday’s COP33,900 closing price. Details on sale price and opening date for the offer could be announced as soon as today. The challenge, local bankers say, will be offering buyers enough of a discount while still reaching the large size the company needs to help fund the EUR2.615bn ($3.76bn) acquisition of ING’s LatAm pension fund and insurance assets agreed earlier this year. “It’s a great company, but a tricky equity story,” says a banker away from the deal. Sura will sell non-voting preferred shares paying a 3% dividend, which bankers say may also represent a challenge given the deal’s large size. A series of well-received follow-on sales in the Andean nation at a time when other countries remain shut to new issuance suggests there is appetite for high-quality Colombian issuers. Sura CFO Andres Bernal Correa told LatinFinance in August that BBVA, Deutsche Bank, HSBC, JPMorgan, Santander and UBS and Corredores Asociados had been hired to lead the deal, a third of which was expected to go to international investors.
Chilean Market Challenging Despite Arauco FO
Chilean equity issuers should find it as difficult as the rest of the region to issue before the end of the year. Parque Arauco took advantage of a calm window to raise $168m-equivalent through a follow-on, but this does not necessarily indicate that more will follow, bankers say. “It will be very difficult to see more issuance. The issuer came through a window that opened in a challenging environment,” says a local ECM banker. The shopping center developer and operator sold 90m shares, with the controlling shareholders purchasing $60m-equivalent. Parque Arauco plans to use the funds for its $840m expansion plan. LarainVial and Banchile led. Looking ahead, the government could bring the offering of shares in water utility Essal before the end of the year. Food producers Agrosuper and CM Chiloe are awaiting better conditions for IPOs, as are builder Ingevec and retailer SMU.
Pacific Rubiales Tempts Convert Holders
Pacific Rubiales is giving holders of its 2014 8.0% convertible bonds the chance to convert to equity early with an additional premium. The Toronto-based Colombian oil producer is offering accepting holders all of the shares due under the current conversion rate of 77.94 shares per CAD1,000 face value, plus additional shares with a value equal to CAD200. The price for the additional shares is to be set as the average price from October 27-November 4. The offer is open from November 9-29. Pacific Rubiales says it is undertaking the offer “to bring maximum balance sheet flexibility” so that it can pursue and execute its acquisition strategy. RBC is managing.