The M&A fee pool fails to keep up with a significant increase in transaction volume this year, suggesting some league table-focused banks are doing business at discount prices. In the year to October 21, M&A deal volume booked by advisors reached $205bn from 1,047 deals, up 185% from $72bn (675 deals) in the corresponding period of 2009. M&A revenue, however, has risen just 27% year-on-year, to $500m YTD. “It’s a global trend in all products,” says the head of LatAm investment banking at a major institution. “There are lots of new entrants offering services to get market share,” he adds. Even excluding large trades like Slim’s telecoms consolidation, or a fairness opinion on Petrobras’ jumbo equity – both stretching the meaning of “advisory” – volume is still a hefty $134bn YTD. “It’s got to be people doing work for free, or almost free,” says a banker focused on international markets. “I don’t think fee levels have gone down.” The banker says divergence is likely the result of banks doing cheap fairness opinions. Merging entities often arrange a pact themselves without the aid of advisors, since they’re already very familiar with the target. They may bring an advisor in at the end just to finalize terms, but the fee would be lower, since internal teams do all heavy lifting. “There is a pretty substantial number of deals either arranged without advisors at all, or mostly without advisors, and maybe they brought somebody in for a final analysis,” says a LatAm M&A specialist. He refers to Vale’s sale of various mining assets to Norsk Hydro for $4.9bn, in which the vendor did not use banks, as an example. Norsk Hydro retained Citi and Credit Suisse on that deal. Most surprisingly this month, Barclays is number 4 by M&A volume, claiming credit for 7 deals worth a combined $46bn, much of it a fairness opinion on Petrobras’ $42.6bn oil-for-shares swap. Rothschild also makes a surprise appearance at number 2, also propelled by Brazilian oil.
Category: Loans
Panama City Gets CAF Financing
Multilateral CAF says it has approved a $120m loan for Panama’s ministry of finance and economy to improve sanitary conditions in Panama City. Terms were not disclosed and CAF officials could not be reached for comment.
Pemex Loan Generates Interest
Mexico’s Pemex has received over $4bn worth of commitments for its $3.25bn dual-tranche loan, according to bankers not running the transaction. The deadline for commitments was last week, with signing expected by the end of October. Sizeable commitments received include a $250m commitment from Sumitomo across both tranches, a $150m ticket from Intesa for the 5-year tranche, and a $75m commitment from EDC to the 3-year tranche, according to market participants. The first tranche is a $1.25bn 3-year revolver, to refinance a loan that matured in September, for which it is offering 125bp over Libor. Bookrunners are Barclays, BBVA, Credit Agricole (admin agent) and RBS. It also wants a new money 5-year term loan for $2bn at L+150bp. BBVA (admin agent), BNP Paribas, Credit Agricole, Citi, HSBC and Inbursa are bookrunners. The revolver is to refinance a loan taken in 2007 for $1.25bn that was priced at Libor+20bp. Fees for participation in the revolver range from 25bp-60bp for $100m, $75m, $50m and $35m tickets. On the term loan, fees range from 45bp to 85bp for $150m, $100m, $75m and $50m commitments.
IFC Guarantees Honduran Loan
The IFC is guaranteeing 36% of a subnational loan for Honduras’ central district municipality for $44m equivalent in local currency. This is the first time that the IFC has guaranteed a loan in Honduras not backed by the sovereign, says Javier Atala, general manager and executive vice president of Banco Financiera Comercial Hondurena (Ficohsa), lead arranger on the loan. The loan has an 8-year term and pays 16%, he tells LatinFinance.. Besides Ficohsa, others participating in the syndication are Banco Atlantida and Banco de Occidente. Out of the 16% interest rate, he says the banks syndicating the loan will divide 14% in equal parts and the IFC will get the remainder as commission. Ficohsa is lending $14.7m equivalent, Occidente $13.2m and Atlantida $13.2m, Atala says. The loan will be used to repair roads and implement an early flood warning system in the district, which includes Tegucigalpa.
State of Mexico Bags MXP610m Loan
The State of Mexico is arranging a 19.9 year MXP610m enhanced loan from Banorte, which will pay a spread of 125bp over TIIE, which closed at 4.8450 yesterday. Moody’s has assigned a Baa3/Aa2.mx rating. The loan is payable through a trust, to which the state has pledged the flows and rights to 100% of its federal participation revenues and to 25% of its revenues from the Fondo de Apoyo para el Fortalecimiento de las Entidades Federativas. The rating reflects the underlying creditworthiness of the State of Mexico, which has a Baa2/A2.mx rating, as well as the features of the loan. These include a strong trust structure, estimates that cash flows generated will provide strong debt service coverage ratios, a moderate level of reserves and strong historical cash flows. The last rating action Moody’s took with respect to the State of Mexico was on August 27 2010, when Moody’s assigned ratings of Baa3/ Aa2.mx to its MXP2bn Municipal Lending Program.
Oaxaca State Achieves Baa2 Rating
Moody’s has assigned a Baa2 rating to a MXP250m ($20m) enhanced loan the State of Oaxaca obtained from Scotiabank. The ratings reflect the creditworthiness of the state. The loan is denominated in MXP, with maturity of 10 years and a grace period of 12 months for principal payments. The loan will pay an interest rate composed of the 28-day Mexican interbank rate, plus a spread.
Venezuela, Argentina Get CAF Financing
Venezuela is getting 2 loans worth a total $700m from CAF, one for $600m to finance the Tocoma hydroelectric plant and the other, for $104m, to improve mass transit. CAF also approved a $500m loan for Argentina to be invested in an electric power line project. Terms were not released.
Micro Lending Rises 13%
A survey by the IDB’s Multilateral Investment Fund shows that microfinance lending in LatAm and the Caribbean rose 13% in 2009, lower than the 18% increase seen in 2008. Lending jumped to $12.3bn in 2009 after reaching $10.9bn in 2008 and $9.2bn in 2007. In terms of loan portfolio, Peru tops the ranking with $3.2bn of microloans. Ecuador is second, with a portfolio of $1.7bn, followed by Colombia, which has a total of $1.4bn in microloans. There are more than 700 microfinance institutions in the region, according to the IDB.
Brazil Sewage Gets IFC Financing
The IFC will provide BRL18.9m to Brazilian water and sewage company Cia. de Saneamento de Sergipe in what it describes as its “first subnational financing in Brazil without a sovereign guarantee.” The loan is for a 7-year term, has a grace period of 3 years and has an interest rate pegged to the local DI rate.
Pemex Gets Commitment on Jumbo Loan
Mexico’s Pemex has received a $75m ticket from EDC for the first tranche of its $3.25bn dual-tranche loan, according to bankers with knowledge of the deal. The first tranche is a $1.25bn 3-year revolver, to re-finance a loan that matured in September, for which it is offering 125bp over Libor. Bookrunners are Barclays, BBVA, Credit Agricole (admin agent) and RBS. It also wants a new money 5-year term loan for $2bn at L+150bp. BBVA (admin agent), BNP Paribas, Credit Agricole, Citi, HSBC and Inbursa are bookrunners. The revolver is to refinance a loan taken in 2007 for $1.25bn that was priced at Libor plus 20bp. Fees for participation in the revolver range from 25bp-60bp for $100m, $75m, $50m and $35m tickets. On the term loan, fees range from 45bp to 85bp for $150m, $100m, $75m and $50m commitments. Bankers say that of the 2 tranches the term loan looks more attractive. The deadline for commitments is October 13.