Category: Equity

Fresnillo’s inauspicious London equity debut adds to the gloom in LatAm ECM, which is headed for significant year-on-year volume reduction. The world’s largest primary silver producer closed 6.3% weaker Friday at 520p after pricing its LSE IPO at 555bp a share – the low end of the 555p-700p target – and hitting a secondary trough of 502p. London stocks meanwhile ended 1% lower Friday, dragged by miners tracking a metals price slide, and US equities were also slightly softer. Fresnillo, a spinoff of the precious metals business of Mexico’s Penoles, raised $1.94bn equivalent after a greenshoe. The unit, which is also a major gold miner, was hoping to raise up to $2.2bn, but bankers blame rocky equity markets and wilting precious metals for the shortfall. However, while silver and gold prices are off the peaks of the year, they are still high versus recent history. The offer comprises 82.89m new ordinary Fresnillo shares and 96.42m existing ordinary shares sold by Penoles, following exercise of an overallotment option, giving it a market capitalization of $7.8bn equivalent. After the deal, Penoles will hold 75% of the Fresnillo capital stock. Penoles expects to bag proceeds net of fees and expenses of approximately $1.02bn. Fresnillo has also applied for a Mexican listing without float. JPMorgan Cazenove had sole books, with Canacord Adams, Citi and UBS as co-managers. Settlement is scheduled for May 14.

An up to $2.2bn London IPO for Mexican precious metals miner Fresnillo is moving ahead and terms are set to emerge today. Fresnillo seeks to sell a total of 160.65m shares in a 555p-700p range via JPMorgan Cazenove, which has sole books. The company is looking to place $900m worth of primary shares, with the remainder in secondary stock, say bankers on the deal, which was heard gaining momentum Thursday. The FTSE closed slightly higher Thursday, driven by mining stocks, while US stocks were also firmer. Also helpful is continued strength in gold and silver prices. Canacord Adams, Citi and UBS are co-managers. Settlement is scheduled for May 14. Penoles intends to retain at least 75% of the ordinary shares of Fresnillo plc on completion of the offer. A listing without float will also be obtained on the Mexican Stock Exchange for Fresnillo.

Brazilian steel producer CSN has announced plans to buy back 10.8m shares on the Bovespa. Currently, CSN has 445m of shares in the market, the company says. The program will run until May 28. Itau, Pactual and Credit Suisse are leading the transaction.

Brazil’s Bovespa closed Wednesday at 67,868 – off the high, but 6.33% firmer on the day – after the biggest LatAm economy joined the ranks of Chile and Mexico in the investment grade club. By contrast, US equity markets wilted after a Fed rate cut that left the policy direction unclear. Meanwhile Brazil sovereign 2017 and 2040 bonds tightened 10bp-15bp, to close Wednesday above 104 and 136, respectively, and the 5-year CDS tightened around 12bp, following a long overdue upgrade by S&P to BBB minus from BB+. The BRL gained 1.1% versus USD. “We thought [an upgrade] was possible, but likely closer to the end of the year,” says Felipe Illanes LatAm Economist at Merrill Lynch. He adds that many investors have already positioned core investments in the country on the prospects of an upgrade, and are now able to increase and expand if they choose. “Market prices have, to a great extent, anticipated the event,” says ABN’s LatAm chief economist Alexandre Schwartsman. Many investors will have to wait for the endorsement of another major agency before allocating. Moody’s has Brazil at Ba1 (stable) and Fitch, which is at BB+ (stable), says it has the sovereign “under active review.” Goldman Sachs points to marked improvement in external solvency indicators, stable inflation, a rebound in growth above 5%, and resilience to global financial turmoil as justifications for the promotion. Illanes says it is too soon to tell if strength will last. It remains to be seen how much juice is left in these markets as liquidity evaporates amid May Day holidays in LatAm.

An up to $2.2bn London IPO for Mexican precious metals miner Fresnillo is moving ahead and set to price May 8. The roadshow for the deal, an asset and management carve-out from Penoles, includes several stops, though none in LatAm. The company was heard in London yesterday, with plans to head to Scotland, Continental Europe, the US, Canada and the Middle East over the coming 10 days. Fresnillo seeks to sell a total of 160m shares at a range of 555p-700p via JPMorgan Cazenove, which has sole books. The company is looking to sell $900m worth of primary shares, with the remainder in secondary stock, say bankers on the deal. Canacord Adams, Citi and UBS are co-managers. Settlement is scheduled for May 14. Penoles intends to retain at least 75% of the ordinary shares of Fresnillo plc on completion of the offer. A listing without float will also be obtained on the Mexican Stock Exchange for Fresnillo.

Shares in Brazilian clothier Le Lis Blanc tanked 20% at their debut Tuesday, following a butchered IPO that saw several revisions to price and size. The company’s executives – accompanied by runway models – rang the Bovespa opening bell Tuesday amid much fanfare. But there was blood on the catwalk after a fall to BRL5.40 per share, versus a BRL6.75 IPO price that netted the issuer just BRL144m, or $86m. With a greenshoe, the company could grow proceeds to BRL162m. However, in a market where liquidity is the height of fashion, this is less than half the BRL325m Le Lis Blanc hoped for when it ventured out in early April at BRL10.50-BRL12.50. Executives away from the transaction note that Artesia, the private equity firm that held 85% of Le Lis Blanc shares prior to the IPO, bought at a comparably low multiple, leaving it less exposed. The firm pulled a secondary share portion from the offer last week to make it more attractive for investors. Merrill Lynch and Morgan Stanley led the IPO, which proves that markets remain hostile to small Brazilian equity launches.

Following its expected acquisition of Brasil Telecom (BT), Telemar’s Oi plans to issue a new class of ADRs and Bovespa-listed shares, say the company’s IR officers. The new shares will reflect the consolidated ownership Oi will have of BT and its several subsidiaries. The size of the offering and the number of shares in each class are still undefined, says an IR executive. Oi will tender for existing shares of BT in a tag-along offer and a separate voluntary tender. Holders of BRTP3 preferred shares are to receive new TMAR shares at a ratio of 0.5 BRTP3 shares per new share. Owners of the two classes of BRTP4 ordinary shares will receive TMAR shares at a ration of .07 shares and 0.23 shares respectively. The new company will have three classes of TMAR shares. One of those classes will provide the underlying for the ADR. Credit Suisse advised Telemar and Citi advised BT on the acquisition.

Le Lis Blanc has cropped its IPO once again in an attempt to convince investors to buy, though diminishing liquidity continues to undermine the deal. The Brazilian clothing company, which earlier this month said it was targeting an offering of BRL300m ($180m) by selling 26m shares at BRL10.50-BRL12.50, had to cut to a range of BRL7.50-BRL9.50 last week. That would have raised it BRL221m at the midpoint. Friday, the company said it would continue to try and price an offering, scheduled for today, but would not be selling any secondary stock, just 19m primary shares. So at a newly revised range of BRL7.50-BRL8.50, the transaction now stands to bring in just BRL150m, or roughly $91m. While the resistance the company faces is not surprising – investors have been very negative on illiquid IPOs since the second half of last year – Le Lis Blanc’s undying will to price despite so much adversity is notable. Most companies facing this kind of pushback recently have simply dropped out and sought other financing alternatives. Private equity shop Artesia is Le Lis Blanc’s most significant shareholder. Merrill Lynch and Morgan Stanley are leading the IPO.