LatAm countries and corporates are comfortably positioned to weather the volatility sweeping across the globe, but capital market activity will be slow to return given the overarching uncertainty, said bankers and government officials on the sidelines of the IMF meetings in Washington this weekend. Indeed the region has already started to feel the effects of such nervousness, with the Brazilian real and Mexican peso for the first time taking a considerable hit in recent days, and bonds spreads widening in response to higher risk aversion. “It is another indicator, another milestone in this process,” said a senior banker. “I do think we are going to have to look anew at LatAm issuance, which has been relatively resilient. It proves yet again that decoupling is just not a word worth thinking about.” All eyes are currently on Europe and whether governments there can follow through on promises and plans to contain the debt crisis in the Greece. “Hopefully the different measures that the Europeans are putting in place start filling some of the gaps,” said Alejandro Diaz de Leon, Mexico’s head of public credit. “The huge question is whether the measures …are enough that we don’t go into the abyss.” Still confidence in LatAm is largely high given how it has already been stress tested several times over the last decade or so. It is also a region that withstood the global turmoil in the wake of the Lehman collapse and saw economies rebound rapidly. “The one region that has experienced the most crises and is the most battle tested market has always been Latin America,” says Robert Abad, a senior analyst at Western Asset Management Co. (Wamco) “For anyone who is positioned defensively or for normalization, LatAm is where you want to be.” Despite that, bankers say market volatility will clearly have a spillover effect on economies across the region and weigh on capital markets and lending activity in the short-term. Bankers may have large pipelines but for now they are largely
Category: Equity
Enesa Pulls IPO
Brazil’s Enesa Participacoes has canceled its IPO filing, becoming the latest to do so in a long line of would-be issuers filing earlier this year. The engineer and builder planned a primary and secondary offering, though had not yet indicated a size. Banco Modal, Banco do Brasil, BTG Pactual, Credit Suisse and Itau had been hired to manage.
Kiwi Uruguay Dairy Farmer Seeks Equity
NZ Farming Systems Uruguay, the New Zealand-registered Uruguayan dairy farmer, is planning to raise $120m via an equity rights offering. With an $85m loan from Olam, the Singapore-based agricultural firm which owns 86% of NZ, due in December, NZ says it must raise the equity or upsize the facility to $110m and extend its term. The matter will be put to a shareholder vote November 4. Olam has indicated it would exercise its rights in the sale, to be priced at $0.70 per share. Olam had offered minority holders this price in April when it sought and failed to take its ownership above the 90% threshold needed to delist NZ.
Canacol Eyes New Equity
Canadian oil company Canacol Energy, which operates in Colombia, Brazil and Guyana, is likely to tap the equity markets again in the next 18 months. “We would almost certainly raise new equity,” if the company’s current 12-18 month exploration program is successful, Mark Teare, Canacol’s vp of exploration says. A deal could come at any time during that period. Canacol got CAD57m ($58m) from a private equity capital raise in March, in a deal bought by managing banks, Cormark Securities, Canaccord Genuity, FirstEnergy Capital, Stifel Nicolaus Canada, Citi, Mackie Research Capital and TD Securities, Canacol says. Teare spoke at a conference organized by Bloomberg Thursday.
MILA Eyeing Mexico, Panama and Fixed-Income
Despite low volumes and a postponed Lima-Bogota Bolsa merger, exchange officials from the Mercado Integrado Latinamericano (MILA) markets see tie-ups with Mexico and Panama in the medium-term, as well as fixed-income cross-listing. “The two potential names are Mexico and Panama,” says Francis Stenning, CEO of the Bolsa de Valores de Lima. He notes Panama has shown the most interest. The next 5 years will be dedicated to improving the cross-listing platform and expanding to other countries, he adds. Thereafter MILA could focus on full exchange integration, and adding fixed-income cross-listings. There should also be room to develop additional products. “We would like to develop futures attached to MILA products,” says Maria Jose Ramirez, vp of the Bolsa de Valores de Colombia. Such products may not generate high volumes, but they should lure foreign investors, which is the true goal of the platform launched in March, Stenning says. Activity has been low so far, but it is hoped the Andean economies continue to remain isolated from global troubles and attract more outside funds. “Asia’s transformational growth story should continue,” even if events in Europe worsen, a particularly positive scenario for the Andean countries, says Jason Press, equity strategist at Citi. He notes a disconnect, in that global equities have priced in a global recession, while commodity prices are reflecting expectations of EM growth. Citi finds the latter to be the more accurate of the two scenarios. Peru, the highest beta among the three MILA markets, would see the most upswing, with Peruvian banks and mining companies such as Southern Copper particularly well-positioned. However, Peru would also be the most vulnerable to a double-dip. Stenning, Ramirez and Press spoke at a conference organized by Bloomberg Thursday in New York.
Shaw Exits IRSA
US investment firm DE Shaw has exited its investment in Argentine real-estate firm IRSA, selling a 7.66% position for $45m. The sale price values IRSA at $10.18 per GDR. IRSA’s GDRs closed at $10.00 Wednesday.
Quinenco Seeks Capital Raise
Chile’s Quinenco is looking to raise CLP225bn ($477m) through an equity issuance. Shareholders are set to vote on the matter October 6. The holdco for Grupo Luksic assets has been in an acquisitive mode of late, agreeing to buy fuel distributor Terpel Chile from Empresas Copec at the beginning of the month for $320m equivalent. It also will exercise its rights in $1.2bn equity raise for Chilean shipper Vapores, of which Luksic companies form part of a block holding 41%. Shares closed at CLP1,308.50 Tuesday.
Siderar Plans Equity Issue
Argentine steelmaker Siderar plans to raise ARP4.17bn ($993m) through the issuance of new shares. Siderar has called a November 10 shareholder meeting to vote on the plan. The issuer majority owned by Ternium does not indicate whether the deal would be through a public offering. Shares closed at ARP24.40 Tuesday.
Occidente Launches Second Round for FO
Colombia’s Banco de Occidente has launched the order period for the second round of its COP200bn ($112m) sale 6.06m shares at COP33,000 each. Buyers came in for 5.49m shares in the first round, indicating the raising of COP183bn so far. The offer closes in 15 days. The bank’s own brokerage and Deceval are managing the sale. Retailer Grupo Exito is also in the Colombian market at the moment, scheduled to close its COP2.502trn ($1.40bn) equity follow-on Friday.
Inbrands Pulls IPO
Brazil’s Inbrands has cancelled its IPO registration, according to the CVM. The owner of several clothing brands and retail locations in Brazil had filed in June for a primary and secondary share sale, though had not advanced to the stage where it indicated size. Bradesco, BTG Pactual, Credit Suisse, Itau and Morgan Stanley had been hired to manage the deal. Inbrands is controlled 48% by the PCP private equity fund and 49% by a group of individuals tied to one of the founding brands in the Inbrands portfolio. It was seeking funds for expansion.