Category: Equity

Despite wretched market conditions for LatAm issuers, especially Argentine ones, YPF, the country’s biggest oil and gas company, is hoping to bring its up to $4bn IPO sometime in the last four months of 2008, say people familiar with the process. If successful, the transaction would set a new benchmark for Argentina, testing investor appetite for what is seen as a strong asset in a volatile, unpopular jurisdiction. The company, which last year was valued at some $15bn when its parent Repsol sold it to the Eskenazi group – a private consortium with ties to the government – plans to IPO 20%-24% of its equity. The company has improved operations, say officials close to the issuer, and the $15bn value is likely to serve more as a baseline value than an average one, they say. As such, the IPO could be in the $3bn-$4bn size range, according to a person familiar with the deal. No official results have been reported, so any estimates on the size of the IPO or the company are preliminary and unofficial. YPF is also heard to not be desperate to price the deal in 2008, meaning if market conditions remain unfavorable, it could carry the offering over into 2009. Credit Suisse and UBS are heading the deal, with Goldman and Itau BBA also carrying senior roles.

San Antonio Internacional, the Bermuda-based privately held onshore drill servicer, has filed for an IPO on the Bovespa through a listing of BDRs via Itau BBA, the lead, Credit Suisse and Deutsche Bank. The company, whose assets are spread around Argentina, Mexico, Venezuela, Colombia, Bolivia, Ecuador and Brazil, is heard to be targeting an offering of well above $500m to be launched in September, say executives familiar with the company’s plans. San Antonio is rotating through the LatAm capital markets on a nonstop mission to solidify its capital structure. It just last month closed a $575m multi-part refinancing of a bridge loan, more than 80% of which carries spreads estimated at over 1,000bp over Libor. And it is currently arranging a pre-IPO loan with two of its underwriters that steps up to similarly lofty levels. The $100m 18-month financing will pay Libor plus 550bp in years 1-6, Libor plus 900bp in months 7-12 and Libor plus 1,500bp in months 13-18, according to the prospectus. Itau will take $75m while Deutsche will take $25m in the pre-IPO loan. San Antonio’s subsidiary Demeter also has a BRL50m loan due 2013 with Itau at DI plus 200bp. Bankers away from the deal claim Itau and Deutsche secured IPO mandates thanks in part to their lending capabilities. GP purchased San Antonio from Pride International for $1bn, $600m of which was debt. The company’s indebtedness stands at roughly $700m, according the prospectus, which also states adjusted Ebitda for 2007 was $251m. If San Antonio’s 2008 revenues stay on track with first half adjusted Ebitda of $124m, its current leverage ratio would be roughly 2.8x.

Brazilian vehicle rental company LocarAlpha has filed for an IPO on the Bovespa Mais, a section of the exchange reserved for small and mid-cap listings. The Sao Paulo-based company would be the second to list on the exchange segment following the February listing of Nutriplant, which sold 2m shares at BRL10.00 each. LocarAlpha has hired Santander to lead the transaction, but has not disclosed the timing or expected size. The company generated BRL88m in revenue in 2007, up from BRL79m in 2006, from vehicle rentals, sales and outsourcing business lines. It plans to use the proceeds to expand its vehicle fleet.

MSCI Brazil is down 18.7% and underperforming GEM, but analysts remain constructive. Citi notes that the Bovespa is 21% lower than a late-May high of 73,516 and has broken below 50 and 200-day moving averages, but it is optimistic of an upside breakout. “We are positive long-term and expect the Bovespa to eventually break out of its 57,000-63,000 range to the upside; our end-2008 target is 66,000,” says Citi. The Bovespa slipped out of that band, closing 3.51% lower at 55,609 Monday. Citi stays overweight Brazil materials, utilities and consumer staples. UBS meanwhile remains constructive on commodity stocks, with 20% in Petrobras, 15% in CVRD, 15% in Gerdau, 5% in Magnesita, and 5% in Heringer. “We believe the sector was oversold in July, and we see a combination of attractive valuation, good 2Q results and supportive supply/demand,” says the Swiss shop. UBS is also raising exposure to real estate and consumer discretionary equity, following a sell-off, expressing the view via Rossi (10%) and B2W (15%). “Responsible monetary policy, large FX reserves, good balance of payments, low exports ratio as % of GDP, strong labor market, and under-leveraged companies provide a constructive environment for supportive domestic activity, sustainable GDP and earnings growth,” says UBS. “PE09E of 9.3x does not reflect these factors, and we see limited downside risks despite current global concerns.”

UBS has initiated Mexico’s Genomma with a buy rating and a MXP21.95 target, up from MXP15.40 Monday. Genomma Lab’s priced in June a $200m IPO at MXP16, the low end of a MXP16-20 target, in a deal managed locally by IXE and Santander, and internationally by UBS/Merrill Lynch. “At our price target, Genomma would be trading at a PE of 14.7 times our 2009 estimate, versus the current 2009E PE of 10.3 times,” says UBS. “This would still put Genomma at a significant valuation discount to most other global fast growing OTC/PC companies,” it adds, referring to over-the-counter drugs (OTC) and personal care products (PC), a universe it says trades at 16.1 times PE for 2009E. “We believe this company will enjoy rapid growth, high profitability, and low organic capex going forward thanks to a proven ability to select, brand and sell OTC/PC products, backed by highly effective advertising, complemented by largely outsourced manufacturing and R&D,” says UBS. The shop expects Genomma to use proceeds from the recent equity offering to buy brands and slowly expand internationally.

Investors have continued to pull out their cash from the Brazilian equity market with net foreign investment outflows totaling BRL14.4bn YTD, according to Itau which cites Bovespa figures. In the week ended July 29 BRL1.192bn exited the country’s exchange. In the week ended July 30, Brazil equity funds as tracked by EPFR lost a marginal $2.1m. LatAm outflows clocked in at a substantial $205.1m, in sync with GEM funds, which lost $652.9m says Itau, citing EPFR.

San Antonio Oil & Gas, the pan-regional drill servicing company formerly known as Pride International, is heard to be preparing an IPO, say people familiar with the sponsors’ plans. Executives at GP Investments, the company’s lead private equity sponsor, have apparently suggested to investors that the plan for San Antonio is to take it public and use part of IPO proceeds to pay down debt it took out to acquire the company. The equity listing is expected to happen in Brazil. GP led a consortium to buy the company in the Fall of 2007 for $1bn, $600m of which was paid for with a bridge from Citi and Calyon. San Antonio is now wrapping up syndication of a $575m multi-part loan to take out the bridge, over 80% of which is being distributed to lenders at rates of Libor plus 400bp over 3 and 5-year Argentine CDS, which amounts to more than 1,000bp over Libor all-in. A GP spokesman declines to comment on San Antonio’s plans.

Brazil’s Empresa de Investimento em Energias Renovaveis (ERSA) has unveiled further information about its upcoming offering of BDRs on the Bovespa. The company plans to issue units made up of one common and two preferred shares. It has not disclosed size of the offering through Bradesco BBI locally, with Credit Suisse as a co-lead and handling the international portion. In the prospectus the company acknowledges multiple relationships with Bradesco, including the fact that BBI FIP, an investment fund controlled by bank’s securities arm, is a holder of the company’s convertible debentures. Bradesco’s insurance arm is also the company’s main co-insurer. ERSA invests in renewable energy and its shareholders include Patria Investimentos with 35%, Eton Park with 33%, BBI with 7.3%, GMR Energy with 15% and DEG KFW Bankengruppe with 10%.

Shares of IronX and LLX, the mining and logistics companies belonging to Eike Batista’s EBX, soared Monday in their trading debuts. As part of a deal to sell MMX’s mining and logistics assets to Anglo American and Cleveland-Cliffs, holders of MMX saw each of their shares converted into three separate stocks: MMX, the original company that went public in 2006, IronX, the company holding the MMX mining assets that were not sold, and LLX, the logistics company that will transport ore for IronX, MMX and Anglo American. As holders of MMX sold into the market, the value of the newly listed IronX shares soared 29.3% to BRL27.03 on the Bovespa, while LLX jumped 21.9% to BRL4.85, according to the Brazilian exchange.

Empresa de Investimentos em Energias Renovaveis is planning an IPO through the sale of BDRs, it said. Ersa, as it is known, was formed in late 2006 by Patria Investimentos and other investment funds to build and acquire small hydroelectric, wind and biomass generation projects in Brazil. Ersa did not set any financial details of the operation, although it plans to sell shares both in Brazil and in international markets. The timing, it says, will depend on favorable conditions in the capital markets.