Mexico’s stock exchange has signed a letter of intent to begin studies to join the Mercado Integrado Latinamericano (MILA). The move makes its interest official after several previous indications from both sides. It does not give any additional details or an indication of when it might be able to join the alliance of the Peruvian, Chilean and Colombian bourses launched this year.
Category: Equity
Posted inDaily Brief
Santander Chile Set for FO
Santander Chile is scheduled to price today a secondary share equity follow-on that is expected to raise more than $900m. The Spanish parent is looking to sell the 7.8% of the Chilean unit held by the Teatinos Siglo XXI Inversiones vehicle, to strengthen its capital position. With Santander targeting the sale of 14.74bn shares, represented by 14.19m ADS, the transaction could reach $922m in size based on Monday’s closing ADS price of $64.96. The shares have dropped 9.65% from the $71.90 close the day before the deal’s announcement November 22. Santander, Bank of America Merrill Lynch and Credit Suisse are managing the international portion, while Santander and LarrainVial will handle Chilean orders. The transaction comes as part of a larger selldown that also involves reducing its stake in its Brazilian operation. The announcement follows the renewal of a shelf to sell secondary shares of Santander Brasil. Santander could sell up to 8.2% of the Brazilian unit in a transaction that would fetch north of $2bn, though it has yet to specify any offering plans, and may opt for a series of smaller block trades rather than a large market deal. Santander has to cover a EUR6.47bn ($10.08bn) capital shortfall to meet new capital requirements imposed by European regulators. The bank has said it will retain earnings and sell assets in order to raise its core capital ratio to 10% from about 8% by June.
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LatAm Equity Sees Inflows
LatAm equity funds booked inflows of $19m in the week ended November 30, according to EPFR. Meanwhile, EM equity funds lost $1.51bn. In terms of performance, EM equity actually performed well during the week ending December 1, climbing some 7.84% over the period, though they are still down 16.36% on the year, according to Lipper. Similarly, LatAm funds were up 8.18% on the week, but down 18.86% ytd. Global small and mid-cap funds were up 7.29%, but down 11.11% ytd.
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Brazilian Tax Cut Boosts Sentiment
Investors and bankers largely cheered Brazil’s decision Thursday to eliminate the IOF tax on foreign equity investment and on infrastructure debentures, pushing the Bovespa some
2.23% higher on a day when US markets pared gains. Still the news left some bankers dissatisfied after the government decided to keep the IOF tax on most fixed-income instruments with the exception of those used for infrastructure. “The IOF exemption for equity is positive, but the government should consider having an exemption for bonds,” says Antonio Oliveira, head of Brazilian DCM at HSBC, at the LatinFinance Brazil International Investors Forum in Sao Paulo. The move followed another 50bp cut in the Selic and other measures to stimulate the economy including a tax in consumer loans, home appliances and homebuilding. Largely the decision is seen as positive and should encourage foreign flows back into an equity market that has experienced a particularly rough year. Bankers have also been encouraged by the elimination of the IOF on debentures linked to infrastructure projects with some already planning investor meetings abroad to see if foreign buyside accounts may express an interest in these types of instrument now that IOF and withholding taxes have been cast aside. Liquidity, however, remains a stumbling block for many international accounts who complain that no secondary market exists given the buy-and-hold nature of the domestic market.
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Essal Opts for Share Sale
Chile’s Essal plans to sell shares, allowing government entity Corporacion de Fomento de la Produccion (Corfo) to reduce its 45% position in the water utility. The sale of 387.7m secondary shares would essentially be an IPO, as Essal shares are illiquid. Corfo had also been considering a direct sale of a stake through an M&A deal, as it looks to get its position down to 5%. This would mimic what it did earlier in the year with its Aguas Andinas, Essbio and Esval, as part of a broad government plan to sell assets to help with reconstruction costs from the 2010 earthquake. The offer period closes December 15, with allocation expected the following day. Banchile, Bank of America Merrill Lynch and IMTrust are managing.
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Pacific Rubiales Gets Nearly All Early Converts
Pacific Rubiales has converted CAD236m ($232m) of its convertible debentures via an early conversion offer that drew participation from holders of 98.9% of the 8% 2014 bonds. In the process it will issue 20.5m shares, of which 2m represent an incentive payment to accepting holders. For each CAD1,000 ($988) face value tendered, the Toronto-based Colombian producer offered face value in shares plus 86.7533 additional shares. This compares to the original conversion rate of 77.94 shares per CAD1,000 face value. The offer closed Tuesday. Pacific Rubiales says it is undertaking the offer “to bring maximum balance sheet flexibility to carry out its acquisition strategy. RBC managed the process.
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Bancolomia Mulls $150m Sura Investment
Bancolomiba is considering a $150m investment in pension and insurance assets that Grupo Suramericana recently acquired from ING, the bank says. Sura had indicated the possibility that the bank would participate as a co-investor along with the IFC, Sociedades Bolivar and UBS, its advisor on the acquisition. Bancolombia acted as bookrunner on the recent COP3.5trn ($1.8bn) equity follow-on that helped fund the purchase of ING’s assets. “The operation is an interesting business opportunity, aligned with the ongoing interest that Grupo Bancolombia has in strengthening its presence in the financial sector, including pensions,” it says. Final details are still to be determined. Sura brought in the co-investors as its follow-on fell short of a COP3.9trn target. UBS came in for COP975bn, Bolivar for $400m and the IFC $200m. Sura agreed to buy the ING assets in July for $3.76bn.
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UOL Readies Public Tender, Delisting
Brazilian internet provider Universo Online (UOL) is readying a public tender offer to buy back the 15.26% of its shares that are outstanding so that it may proceed with a previously announced plan to delist. UOL will offer holders of the 18.3m preferred shares BRL19.90 ($11.05) per share in a process to be held December 29. This indicates it would spend BRL365m if all offers are accept. The price compares to a BRL13.67 average for the past 12 months and a BRL16.97 average since the buyback was initially announced in August, UOL says. Bradesco is managing the transaction.
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BlackRock Buys HRT Stake
BlackRock has acquired a 5.15% stake in Brazilian oil company HRT Participacoes, HRT says. The world’s largest asset manager notified the E&P company that it had acquired 299,900 shares, or more than 5% in the company, according to HRT. Such a stake would be worth BRL177m ($94m) at Monday’s BRL590 close. It appears BlackRock acquired the shares gradually since no large share sales have been registered so far, says Luis Lima, an investor relations officer at HRT. BlackRock officials could not immediately be reached for comment. The institutional investor has announced its new ownership position at a time of much activity for HRT. Earlier this month, the company struck a $1bn deal with Anglo-Russian oil company TNK-BP for the sale of a 45% stake in an oil exploration concession in the Solimoes basin.
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Sura Gets Support on Vital Equity Funding
Grupo de Inversiones Suramericana’s (GrupoSura) COP3.5trn ($1.8bn) equity follow-on last week helped it complete the funding requirements for its acquisition of ING’s LatAm assets in what the company described as Colombia’s largest equity raise by a non-government entity. But tough market conditions have meant that the issuer required the support of a number of co-investors to raise the desired equity financing and stave off any threats to its investment grade rating. This includes Switzerland’s UBS which bought 30m of the shares for a total of COP975bn ($502m), or about a quarter of the entire offering. “An agreement with UBS was already in place, as they were acting as financial advisor in the negotiation process,” a Suramericana spokeswoman says. She adds that the follow-on was done during challenging conditions, but the issuer is satisfied with the result. Indeed equity financing was seen as the best way to ease pressure being exerted by the ratings agencies like S&P, which placed the company’s BBB minus rating on creditwatch earlier this year after noting that incremental indebtedness from the acquisition could impact GrupoSura’s credit profile. Last week GrupoSura also announced that Bancolombia, which is part of the conglomerate’s investment portfolio, was undergoing the required analysis and internal approvals to become a co-investor as well. Bancolombia, along with Santander, led the transaction, while UBS was one of the original acquisition bridge lenders along with BBVA, Deutsche Bank, HSBC and JPMorgan. This follows similar moves by the IFC and Sociedades Bolivar which respectively took 5% and 10% stakes in the pension and insurance business acquired from ING for $3.76bn.Local brokerage Bolsa y Renta calculates that after minority stake investments, the FO and cash on hand, GrupoSura needs to raise just COP1trn ($500m) in debt, though Bancolombia’s contribution may well cover a large portion of that. “We believe that it shouldn’t lose its investment grad