Category: Equity

Brazilian securities clearing house and depository Cetip has filed for an IPO on the Bovespa, following widespread speculation about a jumbo offer. It does not disclose the volume or timing of the sale, though a stake of about 40% is expected to be sold to raise BRL2bn-BRL3bn, according to a banker close to the sale. The deal is expected soon after regulatory approval, since 2Q financials go stale at the end of the month. Cetip has hired Itau BBA, UBS Pactual, Bradesco, Santander and Credit Suisse to lead the operation. Cetip is 70% owned by its member financial institutions, and 30% by private equity fund Advent International, which acquired the stake in March for $171m. Even if it only generates BRL2bn, the equity transaction would be the region’s second largest of the year, after VisaNet’s BRL8.24bn blowout offer in June. Cetip demutualized 2 years ago and considered a number of options including an IPO, but ended up shelving the plan due to global crisis.

As Brazil’s primary equity comeback delves deeper into small and mid-caps, real estate company Direcional Engenharia has registered to issue an IPO. Direcional has hired Santander to lead and Itau and Morgan Stanley as coordinators, but has not set a date or target volume. It plans to use proceeds to acquire land, develop projects and for working capital. Direcional is based in Minas Gerais state, and operates in the southeast and northern regions of Brazil. In 2008, Direcional sold a 25% stake to Tarpon Investment Group for BRL250m. Brazilian IT outsourcer Tivit is set to test appetite for Brazilian small caps with an $200m-$300m IPO expected in September or October.

Brazil’s Cetip declines to comment on speculation it plans to file for an IPO this week. Investors have been expecting an offer from the securities clearing house and depository and other issuers who put off 2007 and 2008 offerings due to the crisis, and Brazilian paper O Estado de Sao Paulo reports Cetip will file this week to raise up to BRL4bn. “Conditions have improved. A deal like this could get done now,” says a Brazilian ECM banker, noting that while it should be a large transaction, reaching BRL4bn might require aggressive valuation. Goldman Sachs is heard among the likely lead banks, according Brazil-focused equity investors based on its leading of the BM&F Bovespa offering. The shops attached to larger domestic banks among Cetip’s ownership structure, including UBS, Itau and Santander, are also favored. If a deal goes through, it would be the region’s second largest of the year, after VisaNet’s BRL8.24bn offer in June. Cetip is LatAm’s largest depository for private fixed-income, reporting net profit of BRL41m on net revenue of BRL89m in 2008. Cetip demutualized 2 years ago and considered a number of options including an IPO, but ended up shelving the plan due to the global crisis. In March, private equity firm Advent International bought a 30% stake in Cetip for BRL360m from local financial-market participants.

Colombia’s Promigas has placed COP400bn ($197m) in bonds on the domestic market. The gas provider sold COP80bn in 2016 bonds at the IPC inflation rate plus 4.95%, COP150bn in 2019s paying IPC plus 5.40%, and COP170bn in 2024s at IPC plus 5.99%. Proceeds will refinance existing debt. Bancolombia managed the sale, rated AAA on a national scale. It was the issuer’s first placement since 2002.

Brazilian meatpacker Bertin, which recently emerged from a period of financial stress, is in talks with investment banks to issue shares via an IPO, says a company spokeswoman, confirming remarks made by a Bertin director to a Brazilian paper. She adds the company would be targeting a 2010 offering, and not a deal in 2009. Bertin has long been discussing raising equity, and most recently said it was looking to issue in 2007 when Minerva filed a placement via Credit Suisse. That deal took place in July 2007. Bertin also has $350m in outstanding 10.25% of 2016s rated B1/B minus that were trading at around 82 cents on the dollar last week, according to Credit Suisse fixed income research.

BM&FBovespa has entered exclusive talks with the Nasdaq OMX to set up a series of agreements that could eventually contribute to a surge in equity trading on the Brazilian exchange. The discussions, which will last for 60 days, are designed to replicate on the cash equities side an agreement between the CME and the BM&F, sealed in January 2008, for derivatives and futures trading into and out of Brazil, says a person involved in the talks. The first initiative set out to allow users of both the BM&F and the CME to trade seamlessly across an integrated platform using shared access to market prices. “Exchanges are all looking for ways to boost volume,” says the executive, who notes the conversations between the 2 entities took off rather abruptly in the past months. If successful, an agreement would allow equities traders using Nasdaq OMX to trade Bovespa-listed products and access market data native to both platforms. The exchanges would also look to share technology geared toward issuers. The move is a coup for Nasdaq, which competes against the NYSE for exclusive access to users of LatAm’s largest exchange. NYSE officials decline to comment, noting only that their institution remains committed to providing listing services to LatAm clients. Those differ substantially from trading and routing, which involves a higher degree of network and exchange-related technology. Nasdaq OMX also recently helped the BVC in Colombia set up a futures trading platform in the past year, and other agreements in LatAm may also be coming, according to an executive close to the initiative.

Multiplan, a Sao Paulo-based real estate developer, has filed to issue around BRL650m on the Bovespa. The deal would represent around 18% of the company’s market cap, which stood at BRL3.68bn yesterday. Multiplan is the fourth prospective issuer to file for a Bovespa offering in the past month. Santander, Tivit and Gol have also begun readying offerings that could start pricing in September. Tivit, Gol and Multiplan plan deals sized well under BRL1bn, which indicates the market may be opening up to slightly smaller issues from less familiar names. Other recent sales in that size range in the real estate related sector include BR Malls and MRV. Gafisa shelved plans to do a similarly sized deal when its stock price dropped. UBS Pactual, Credit Suisse and Morgan Stanley are leading the Multiplan deal.

Food producer Grupo Nacional de Chocolates has sold COP500bn ($250m) in inflation-linked bonds on Colombia’s domestic market. The issuer priced COP98.5bn in 2014 bonds at the IPC index plus 4.19%, COP131.8bn in 2016s at IPC plus 4.96%, COP135.5bn in 2019s at IPC plus 5.33%, and COP134.2bn in 2021s at IPC plus 5.59%. Total demand reached COP1.5trn, according to Chocolates. It will use proceeds to refinance debt at the operating company level. Bancolombia managed the sale, rated AAA on a national scale.

Brazilian IT outsourcer Tivit is set to test appetite for illiquid LatAm small caps with an IPO expected to raise $200m-$300m equivalent in the coming months. Equity investors have for many months insisted on quality and scale, but Tivit, which should price in September or October, comes at a particularly opportune moment for small caps. The MSCI LatAm small cap index has rallied 96% YTD, after falling 62% in 2008. That compares to a 61% rise for the MSCI LatAm, which fell 51% last year. “In general, small caps are very sensitive to economic growth,” says Guilherme Reboucas, a portfolio manager at Itau Unibanco Asset Management, whose equity holdings are worth BRL20bn. “In Brazil, many of the small caps are consumer and homebuilding companies, both sectors that have rallied tremendously this year,” he adds, pointing to names like Herring, Guararapes, Hypermarcas and Marisa, which have leapt between 117% and 145% in 2009. Low income homebuilders like Tenda and MRV have also soared, thanks to a new program by the government to foster construction of affordable housing. While many of these companies have yet to deliver results, the outlook for GDP growth is strong and domestic consumption in Brazil is expected to keep expanding, says Reboucas. Itau sees Brazil GDP expanding 5% next year. Liquidity, however, remains an issue for smaller issuers, and investors have so far this year expressed very clear preferences for large liquid names, say bankers. This will be among the challenges for Tivit as it roadshows its offering via Credit Suisse, Morgan Stanley and Bradesco BBI. The IPO will be Tivit’s second attempt, following an aborted mission scheduled for Q4 2007. At around the time of the first attempt, investors had begun to shun small caps, owing to lack of liquidity and in many cases the fact they were trading below issue price.