Category: Equity

The BM&FBovespa has told banks, brokers and asset managers that it will select a group of institutions to become derivatives market makers. It will choose four banks, one institutional investor, two local brokers and two non-financial commodities and financial contract traders for the initiative, which is designed to boost secondary liquidity in its expanding derivatives platform. Selected participants will be exempt from fees associated with the products they support. They will also get a portion of net revenues generated by trading in exchange for providing bids and offers for contracts on a specified number of sessions per month, as well as trade above a certain volume, to be established by the exchange. Participation in the program is a minimum of 6 months and maximum of 1 year. The BM&FBovespa is expected to see a surge in volumes as it links up its network to the CME’s platform, providing managers around the world with direct access to its products, and local dealers with access to the CME’s contracts.

The city of Sao Paulo raised $20m on Thursday by selling carbon credits via a BM&FBovespa-run auction, according to the exchange. The second auction ever for this type of asset in Brazil was led by Geneva-based Mercuria Energy Trading, which purchased the entire lot of certificates for €19.20 per credit, and issuing a total of 713,000 certificates. The price per credit represents a 35.21% premium over the per ton base price established for the auction. The certificates are originated by two sanitation projects called Aterro Sanitario Bandeirantes and Aterro Sanitario Sao Joao. The BM&FBovespa says 10 institutions participated in the sale, with 8 putting in bids.

Conditions are rough for all borrowers, but as the Bovespa had another 6.7% drop Tuesday, the outlook for equity is especially bleak. The three LatAm IPO hopefuls – VisaNet, San Antonio, and El Tejar – face difficult odds for pricing in 2008, say investors and bankers eyeing the market. “Unless there’s a desperate need for the funds I would wait until 2009,” says Will Landers, manager of BlackRock’s $8bn committed to the region, taking a hypothetical underwriter’s point of view. VisaNet, the credit card company, has the best chance to price given its strong market presence and consistent secular trends supporting a rise in credit and consumption, says one banker not on the deal. San Antonio and El Tejar, both seeking BDR listings face more difficult odds despite being seen as strong names with planned offerings expected to top $500m in size, say bankers away from the deal. San Antonio has until the end of October to price using current numbers but its heavy Argentina component – many of its assets are based in the country – may work against it. San Antonio has strong sponsors backing it and is benefitting from a generally high demand for well services that bankers on the deal say are not affected by the changing price of oil. One banker on the deal says the IPO has not been pulled yet, but that may happen if conditions remain poor. El Tejar, a farming company based in Argentina with assets and Uruguay and Brazil, may also face the same stigma. VisaNet is being led by BBI, BB Investimentos, JPMorgan, Goldman Sachs and Santander. Credit Suisse, Itau and Deutsche are leading San Antonio, while Itau and Morgan Stanley have books on El Tejar.

Citi’s equity strategists have put Brazil at the top of their LatAm performers list based primarily on a severe downswing in the Bovespa since late-April. The Brazilian market’s 40% drop in the past 4.5 months combined with improved domestic fundamentals set the foundations for improvement in coming months, says the shop. Citi also believes commodities have sold off more than they should have, while the dollar is still set to weaken. With the earnings outlook still positive, the shop tips Brazilian financials, materials and telecoms, as well as real estate. It has a 62,000 target for the Bovespa for the end of 2008, down from a previous 66,000. Mexico, which is down some 22%, has outperformed the 34% drop seen by LatAm since may this year, largely thanks to its low stock of commodity companies, says Citi, which has lowered its year-end Bolsa target to 30,000.

El Tejar, the Argentine agricultural developer with assets in Argentina, Brazil and Uruguay, has filed for an IPO via a BDR issue through Itau BBA and Morgan Stanley. The company most recently visited the markets seeking debt financing – a $150m A/B loan including a $30m 7-year A loan at Libor plus 490bp and a $120m B loan via Standard Bank paying Libor plus 450bp. The deal is heard to have struggled to get a full book, say bankers away from the process. The company not yet indicated the size of its planned offer but timing of the filing indicates a deal is targeted by year-end. It is the second Argentine company to recently file for a Brazil IPO. San Antonio Internacional, which has many assets in Argentina, also filed with the CVM for an IPO. The fate of both deals largely depends on a dramatic improvement in the Brazilian equity market. A continuation of the current environment will almost surely lead both issuers to withdraw, say bankers watching LatAm ECM.

Brazilian credit card provider VisaNet has filed for an IPO on the Bovespa via the sale of secondary shares held by the banks that own it. Those include Bradesco (39%), BB Investimentos (32%) and Banco Real (14%), with Visa International also owning a 10% stake. Bradesco’s BBI unit will lead the local offering with BB Investimentos, Santander, JPMorgan and Goldman as joint leads. The main comp is Redecard, the Brazilian rival held by Citi, Itau and Unibanco that went public last year via a $2.4bn IPO, and followed up with a $724m secondary offering in January. In the quarter prior to Redecard’s offering, the company posted adjusted Ebitda of BRL317m. VisaNet’s H1 adjusted Ebitda for the period prior to IPO is BRL862m, which places the companies’ revenues in line with each other and suggests VisaNet’s IPO offering could be of comparable size to that its rival’s in 2007. Redecard went public at BRL25.00 and closed at BRL29.00 yesterday.

Brazil’s equities, futures and derivatives exchange has launched two new indices to track the performance of small and medium-sized companies. The BM&FBovespa MidLarge Cap (MLCX) and the BM&FBovespa Small Cap (SMLL) indices will track companies whose market caps fall within the assigned categories. Some 85% of the Bovespa’s market cap falls under the MidLarge Cap parameters, says the exchange.