Category: Equity

Brazilian renewable energy specialist Renova has launched its IPO with an offering document published in local papers. The company is targeting a March 17 sale of up to 33.7m primary units that could yield as much as BRL741m. Updated materials show Santander and BofA-Merrill as joint-lead bookrunners. Renova no longer names Itau BBA, which was listed as the deal’s third bank in a prospectus filed earlier this year with the CVM. Bankers on the deal offer a variety of explanations for the departure of the Brazilian bank. Executives familiar with Itau BBA’s view suggest disagreements on timing of the deal led it to walk away. Meanwhile, executives away from Itau BBA suggest the shop may have chosen to purse another mandate that was contingent on it quitting Renova. In either case, Itau was third bank and likely stood to earn weakest economics on the deal. Santander is lead coordinator and BofA-Merrill is stabilizing agent. Through its project finance units and an infrastructure fund called Infra Brasil, Santander has several business ties with Renova. Renova has recently won a series of wind energy blocks to develop via a large government auction and is seeking capital for those and new projects by issuing primary stock. The offering is made up of 24.7m shares plus a 3.9m unit greenshoe and a 5.1m unit hot issue. The price range is BRL19.00-BRL25.00.

WTorre, the privately-held Brazilian commercial and industrial real estate developer, is close to filing an IPO on the Bovespa, according to an executive away from the deal. A request to issue is heard to have been sent to the CVM late Friday and is expected to include holdings of Walter Torre, founder of the Sao Paulo-based company. WTorre has for several years financed its developments through local real estate securitization funds called CRIs. It claims to have become the leading user of the funds. Through CRIs, WTorre has raised debt backed by future flows from rentals to build large properties including commercial office buildings and infrastructure facilities. The company has an engineering arm, a commercial development arm and a homebuilder. WTorre operates in a similar space to BR Properties, which is scheduled to issue shares this week via Itau BBA Bradesco BBI, Goldman Sachs, Safra and Santander.

Brazilian commercial real estate developer and manager BR Properties is on the radar screens of LatAm equity investors heading into the week of its scheduled IPO. The company hopes to issue 57.5m primary shares and 14.4m secondary units at a midpoint of BRL16.00, which, if added to a greenshoe and a hot issue, could yield BRL1.5bn. Analysts at funds and portfolio managers say they are looking at the deal with interest, though it is too early to say whether it will enjoy hefty oversubscription. Price is scheduled for March 4. Investors note 2 peers for BR Properties: Sao Carlos and Cyrela Commercial Properties. “At the low end of the [14.00-18.00] range, BR Properties’ discount to its fair value [as defined by an independent consultancy whose results are in the prospectus] is 17%,” says a Rio-based fund manager studying the offering. This appears smaller than the discount that CCP and Sao Carlos trade at, of 25%, he adds, concluding valuation appears ambitious. A Sao Paulo-based equity manager meanwhile believes the company has very strong management. He adds that valuation of the portfolio and business as a whole appears attractive. However, questions remain as to the commercial property industry outlook and the company’s business model, which involves retrofitting portions of buildings. The company is on a roadshow in the US this week ahead of pricing. The deal is led Itau BBA, the global coordinator, and joint-leads Bradesco BBI, Goldman Sachs, Safra and Santander.

Investors, bankers and regulators are hopeful that Mexico’s domestic equity market will see new issuance this year. IPOs have been notoriously infrequent, even during good times, with none last year. But the economic recovery and a recent rule change allowing greater flexibility for the country’s pension funds to invest in individual stocks should help. “This is an important moment. This year could be important for big and medium size companies,” says Javier Artegas, strategic planning director at the Bolsa Mexicana de Valores. Artigas expects there will be 2 IPOs this year from large companies, and 4-5 from mid-cap sized companies, along with 2-3 more private equity-linked CCDs, and a few other CCD deals. BBVA Bancomer’s head of DCM Ricardo Cano says there could be between 5 and 10 IPOs this year. They were speaking on a panel at the 5th Annual LatinFinance Cumbre Financiera Mexicana Thursday in Mexico City.

Colombian financial institution has sold COP250bn in local subordinated bonds in 2 tranches. A COP112bn 7-year piece pays IPC plus 5.25% and a COP138bn 10-year piece pays UVR plus 5.50%, says John Fredy Linares, head of financial management at the institution. He adds that total demand reached COP400bn. Proceeds of the issue, which Davivienda is managing, will be used for working capital.

Banco de Bogota has sold COP200bn in subordinated bonds across 4 tranches. A COP45.5bn 7-year piece pays IPC plus 5.33%; a COP49.2bn 7-year piece pays UVR plus 5.29%; a COP50.3bn 10-year piece pays IPC plus 5.45%, and a COP55.1bn 10-year piece pays UVR plus 5.45%, says Juan Carlos Paez, the bank’s treasury manager. He adds that total demand soared to COP306bn. This issue is part of the bank’s plan to issue up to COP1.50trn over a 5-year period to raise working capital. Banco de Bogota managed the sale itself.

Recent IPOs from Brazilian companies with small and medium-sized market caps are giving investors better returns than the Ibovespa by significant margins. The time period under consideration is short, and high beta Brazil has been whacked around by negative global trends. But the small-cap outperformance trend is backed by a belief among some market participants that companies with niche business lines serving the domestic economy are poised for strong growth in the coming year. “Some of these IPOs were priced well below the range, which is what you have to do with a small deal,” says Will Landers, portfolio manager at BlackRock, whose $8.2bn in LatAm-dedicated funds includes up to 35% exposure to mid and small caps. “You have to leave a little upside,” adds the investor, who also manages a $42m LatAm small cap fund. Among outperforming IPOs are Cetip, which through February 19 outperforms the Ibovespa by 16% since pricing late October, according to data from Dealogic and Economatica. Fleury meanwhile beats the index by 21% since a December launch. Aliansce, this year’s first IPO, is 8% higher than the benchmark stock index, and Direcional’s November IPO outpaces the Ibovespa by 8%. Lastly, Multiplus, which priced earlier this month, is beating the index by 14%. The data undermines prevailing conventional wisdom that says investors must stick to liquid, recognized names. “If you have the right story, you can get deals done, even if they’re smaller than $200m,” says a senior LatAm equity banker at a European underwriter.

Argentina’s Industrias Metalurgicas Pescarmona (IMPSA) has filed to spin off its renewables business through a Bovespa IPO. If successful, the moves would mark the second time an Argentine entity lists BDRs on the Bovespa, though Venti, as the unit is called, is technically a Luxembourg company. The first issuer was Banco Patagonia, which listed shares in Brazil in 2007. However, Venti, which is controlled by the Pescarmona family, has renewable energy assets in LatAm and Southeast Asia. It’s LatAm holdings include wind and hydro in Brazil, which accounts for the majority of revenues, Argentina, Chile, Venezuela and Colombia, while in Southeast Asia, it owns assets in Vietnam and Malasia. In 2009, hydro revenues totaled BRL265m while its wind businesses generated BRL133m. Total Ebitda in 2009 came in at BRL120m. Proceeds of the offering will go to investments in existing wind parks and hydro facilities (45%), new projects (30%) and working capital (25%). In December, IMPSA Wind, the wind power unit of the group that will become part of Venti, won concessions to operate 8 lots in the Brazilian state of Ceara totaling 211MW. That will likely demand investments of over BRL1bn. Total wind investments in Brazil in the coming years are expected to total BRL2.5bn, according to executives close to the initiatives. Bank of America-Merrill Lynch and BTG Pactual have been hired to lead the deal.

Santander’s Brazil unit, which went public via a BRL14bn IPO in October 2009, will likely take up to 2 years or more to see its valuations converge with its larger peers Bradesco and Itau Unibanco, says CFO Carlos Galan. “To expect to converge [with other banks’ valuations] this year would be unrealistic,” he tells LatinFinance. “As we gradually fulfill our objectives, I expect we will converge and capture the differential we have with [Bradesco and Itaú],” says Galán. The statement is a departure from what at least some bankers and Santander executives sought going into the IPO process last year. At the time, some of the more bullish expectations included a valuation on par with or above Bradesco’s, though investors were unanimous in demanding a discount to compensate for the lack of a track record. The touted IPO was priced at the BRL23.50 midpoint of the stated range, but quickly traded down. As of yesterday it was 5.6% below its issue price. The deal came at 2.7x price to tangible book and a P/E of 10.7x, substantially below Bradesco. Earlier this week, Santander units were trading at a discount to Bradesco’s preferred shares of over 20% on a P/E and 20% on a P/BV basis, according to Economatica. Discounts to Itaú Unibanco PNs were approximately 35% and 40% for P/E and P/BV, respectively. While the bank expects strong growth in a number of products, integration remains the chief concern and Galan expects that to be wrapped up by Q3. The unti’s first 2 quarters have failed to impress some analysts. “We found weaker margins and the stagnant asset quality disappointing,” says Goldman Sachs in a report following Santander’s Q4 earnings announcement earlier this month. The shop, which was the first to initiate coverage of Santander’s Brazil-listing, has a neutral recommendation on the stock. “They promised a lot of things during the IPO and are having trouble delivering them,” says a São Paulo-based banks analyst at a European shop, referring to overall performance o