Morgan Stanley has set up a sales and trading team in Mexico and will launch its full broker-dealer offering by Q4, Dario Lizzano, director of LatAm equity research for Morgan Stanley tells LatinFinance. “In terms of market share we expect to be in the top 3 in 18 months’ time,” says Lizzano. The expectation that there will be an increase in trading volume locally and clients wanting on-the-ground expertise are among reasons to open a broker dealer, says Lizzano. “Today, the average daily trading volumes of LatAm equities are taking place 50% in local markets and 50% in ADR,” says Lizzano. “We expect growth in capital market activity to be faster at a local level and in 5 years plus we expect volumes to be 60% locally and 40% ADR,” he adds. Lizzano adds that Morgan Stanley wants a presence in Mexico in particular because it believes pension funds and other institutional investors will substantially grow equity exposure. The sales and trading team is led by Miguel Machado, who relocated to Mexico in the summer. Prior to this he was a senior sales person for the LatAm desk in the London office for 5 years. Victoria Mas will be the senior sales person. She joined in July from BBVA Bancomer, where she worked in the Mexico institutional equities sales team. Javier Diaz Rivera, hired in August, will be responsible for equity trading. He was previously in the equity trading division at Merrill Lynch for 10 years, where he worked as a senior trader on the LatAm equity desk in the Mexico and New York offices. Nikolaj Lippman was hired in August and will be the Mexican country analyst. He joined from Bankinvest Asset Management, where he was chief portfolio manager for 9 years, and reports to Guilherme Paiva.
Category: Equity
Petrobras Reported Eyeing Jumbo Debt
Petrobras plans to raise $60bn from the debt markets in the next 5 years, according to local press and wire reports citing CEO Jose Sergio Gabrielli. Fresh off of a $70bn equity raise last month, the state-run oil producer will now turn to debt markets as it looks to fund an investment plan of more than $220bn. Petrobras does not foresee additional equity, Gabrielli is reported as saying. The company’s borrowing needs, and the effect they might have on its credit ratings, have been among the factors dragging down the stock this year. Petrobras preferred and common shares closed Friday at BRL26.00 and BRL29.00, respectively, representing drops of 3.0% and 4.1% since the September 23 equity sale, and of 28.8% and 29.0% on the year.
Brazilian Driller Launches IPO
HRT Participacoes has launched investor meetings for an IPO on Brazil’s Bovespa, expecting to price October 21. The Brazilian oil and gas operator would raise BRL2.62bn if it prices at the midpoint of its BRL1,050-BRL1,350 range and a rather large overallotment is fully exercised. The base deal is 1.62m shares, with the possibility for both a 324,000 share hot issue and 243,000 greenshoe that would increase the base by 35%. The base alone would raise BRL1.94bn at the midpoint. HRT says the transaction will result in at least a 25% float. It seeks funds to develop blocks in Brazil and Africa won since entering the E&P space last year. According to a prospectus, 75% of proceeds from the IPO will go to exploration in Brazil’s Solimoes basin, 15% for exploration on offshore blocks in Namibia, 2% to explore in other Brazilian blocks and 8% for other projects. What became HRT was founded in 2004 as its oil services arm, IPEX, by a group of former Petrobras and ANP executives, and would move enter exploration and production in 2009. HRT held 2 private share sales in 2009 to raise BRL479m, according regulatory documents and counts MSD Capital, Perella Weinberg Capital and Senator Investment among shareholders. Credit Suisse is global coordinator, with Citi and Goldman Sachs as bookrunners. The deal would give what the Brazilian market hopes is the first of several oil plays following Petrobras, though Repsol recently cancelled a $4bn spinoff.
HSBC Adds Equity Head
HSBC has hired Delfons Machado Neto as head of LatAm equities, according to a bank spokeswoman. Machado, who was previously a partner at Dunamis Equity Partners in New York, will be based in Sao Paulo. Prior to Dunamis, he had been head of equity trading at Itau and head of equity and derivatives trading at Santander Brasil.
Mexican Gym Winded on First Day
Grupo Sports World traded down 1.5% to MXP15.75, the day after pricing 53.6m shares at MXP16.00 to raise MXP857m.The Mexican bolsa dropped 0.33% on the day. The Mexican health club chain formerly owned by private equity fund Nexxus Capital says 1,657 investors bought the deal, 54% of them institutional. The deal represents a 61% float and Sports World claims it is the first pure fitness company to publicly trade in LatAm. The exit represents the third stock market exit for Nexxus, which keeps about a 20% stake, and will “maintain a significant influence in the company,” Sports World says.
Mexican Gym IPO Falls Short
Grupo Sports World was set to raise Wednesday MXP857m in its IPO, pricing shares at MXP16.00, below the bottom of a MXP18.50-MXP22.00 target range. The Mexican health club chain owned by private equity fund Nexxus Capital was to sell 53.6m shares, according to a source close to the transaction, which indicates that some but not all of the 7.3m available overallotment would be exercised. The base deal includes 21.6m primary and 26.8m secondary shares, according to the prospectus. Nexxus, which bought Sports World in 2005 through its second PE fund, will see its stake go to around 20%, from 67%. It is Mexico’s fourth IPO this year, and second largest after retailer Chedraui. Santander managed the Sports World deal, with Actinver and Ixe as co-managers.
Petrobras May Need More Equity: Barclays
Petrobras may need new equity to fund its ambitious capex plans, Barclays says, noting that the stock’s valuation is no longer compelling following last month’s $70bn equity sale. “Petrobras may need additional new equity by 2013/2014 if oil prices do not average above $80/barrel in the next several years,” the shop says in a report lowering the 12-month target on the ADS corresponding to its preferred shares to $34 from $39. It also chops the ADS corresponding to common shares to $35 from $40. Future return on capital will likely be adversely affected by its planned heavy investment in the domestic refining segment as well as the local shipbuilding efforts, Barclays says. It adds that it is concerned about a local cost environment over the next several years in light of the country’s large construction backlog. Preferred ADS closed Wednesday at $31.22, while the common ADS closed at $35.09. Preferred and common shares on the Bovespa closed Wednesday at BRL29.18 and BRL25.86, respectively, representing drops of 3.5% and 3.1% since the Sept 23 transaction. Barclays provided the fairness opinion to Petrobras on the valuation of the oil price on which it based its swap of shares to the government for rights to 5bn barrels worth of pre-salt oil.
Televisa Bags Univision Bargain
Televisa is investing $1.2bn in Univision, the US Spanish language broadcaster, in a deal that implies an equity valuation for the company of around $2.3bn, according to Enrique Senior, MD at Allen & Co, which advised Televisa. The market rewarded the move, sending the stock up 13.75% yesterday. The deal values the equity significantly less than 4 years ago, when Univision was acquired by a consortium of investors for $12.3bn in a deal that valued the company’s equity at around $4bn, according to Senior. “No one feels good about selling below cost,” Senior tells LatinFinance. “But valuations change.” In addition to a secular decline in media valuations since the last Univision deal, the broadcaster has, alongside its competitors, seen advertising revenues plateau. “It’s a great deal for Televisa and you can see that in the stock,” says a senior Mexico-based banker not on the transaction. Televisa, whose $12bn bid failed to attract Univision’s attention in 2006, now gets 5% of Univision in exchange for cash and a 50% stake in a JV valued at a combined $130m. Televisa will also buy convertible debt worth an additional 30%, and an option to acquire a further 5% stake in the future, though terms of the debt investment are not disclosed. The deal could result in Televisa owning 40% of Univision by 2025. As part of the agreement, Univision is increasing royalty payments for Televisa programming, from an existing 9.36% of television revenue, excluding certain major soccer events, to 11.91% of substantially all of Univision’s audiovisual and interactive revenues through December 2017, at which time royalty payments to Televisa will increase further to 16.22%. Additionally, Televisa will receive an incremental 2% in royalty payments on any Univision audiovisual revenues above the 2009 revenue base of $1.6 billion. “Assuming applicable Univision revenue of $2.7bn in 2017, we believe that Televisa would receive approximately $450mn in royalties from the new arrangement in 2017
PE Gym Sets IPO Range
Grupo Sports World, the Mexican health club chain owned by private equity fund Nexxus Capital, plans to price an IPO at MXP18.50-MXP22.00, according to its prospectus. The sale would yield MXP1.13bn, if priced at the midpoint and an overallotment is fully exercised. Books are set to close Wednesday on the sale of 21.6m primary and 26.8m secondary shares, plus a possible 15% overallotment. Santander is leading the deal, with Actinver and Ixe as co-managers. Sports World plans to use proceeds for working capital, including for organic growth and acquisitions. It had MXP447.1m in revenue in 2009, according to the prospectus. Nexxus bought Sports World in 2005, and has taken it to 14 locations from 5. The PE shop would see its stake go to 18.49% from 67.00% if the greenshoe is fully exercised. It would be Mexico’s fourth IPO this year, following grocer Chedraui, grower Proteak and brokerage Actinver. If done at the midpoint, it would be second-largest.
Su Casita Dangles Longer Debt, Equity
Hipotecaria Su Casita has presented a restructuring plan to holders of its MXP8.74bn in debt, offering longer-dated new debt and equity. The troubled Mexican mortgage lender will offer holders of its MXP1.985bn in short-term (less than 12 months) local debt cash worth MXP1.30bn (65%) of the debt, new 3-year debt worth MXP99.2m and an equity position with MXP1bn book value, or 0.02% of total capital. Meanwhile, holders of long-term (1-year+) dollar and peso debt, which totals MXP6.75bn, are offered MXP1.50bn in new 5-year debt paying TIIE plus 250bp, MXP551m in 3-year debt, MXP500m in 10-year subordinated debt paying a 3% coupon that steps up to 8% and is worth 10% of the company in the event of conversion. It also offers an equity stake worth 19.98% of the company. The deal represents recovery value of 70% in the case of short-term debt, and 51% for long-term debt holders, Su Casita says. Su Casita, 40% owned by Spain’s Caja Madrid, has been seeking alternatives since a deal to sell to BBVA Bancomer fell through in September. Rothschild is advising on the restructuring process, according to a company official.