Santander Mexico has priced a MXP52.81bn ($4.11bn) IPO, according to sources familiar with the transaction, coming at the midpoint of its price range and delivering Mexico’s largest-ever equity debut. With heavy demand, the issuer could have priced at the top of the range, but left breathing room for investors, many of whom saw fair value at the lower end. In the largest equity sale in LatAm since 2010, the bank priced 1.69bn secondary shares, assuming the exercise of a 15% greenshoe, at MXP31.25 each, versus a MXP29.00-MXP33.50 range. Investors appeared to get their wish of a discount to peer Banorte, with the midpoint seen implying about 10x-11x 2013 price/earnings versus Banorte’s 12x. “This is a high-quality bank and has better operating metrics than Banorte,” says a participating EM portfolio manager, noting low operating costs, and high efficiency and profitability versus the system. “They could have priced at the top of the range, but this is a smarter level. They leave something for investors,” says an ECM banker away from the deal, noting this was a must considering the challenging nature of LatAm new issuance this year. The deal, said to be multiple times oversubscribed values the bank at more than $17bn, and was to be divided into 1.18bn shares in the form of ADRs, representing about 80% of the total transaction, and a Mexican portion made up of 294m shares. The floating of a nearly 25% stake in the Mexican unit will allow the Spanish parent to shore up its finances. Santander now plans to IPO its other major subsidiaries, including Argentina’s Santander Rio. Investors receive exposure to the fourth-largest bank in a system expected to see strong credit growth as Mexico’s economy grows. Santander, UBS, Deutsche Bank and Bank of America Merrill Lynch were global coordinators on the transaction. Barclays, Citi, Credit Suisse, Goldman Sachs, Itau, JPMorgan and RBC were joint bookrunners. Santander, Banamex, BBVA Bancomer and HSBC managed the domestic portion
Category: Regions
Agriculture Fund Preps MXP Bond
Fondo Especial para Financiamentos Agropecuarios (FEFA) plans to issue up to MXP3bn ($233m) in the Mexican domestic bond market October 2. The trust managed by development bank Fideicomisos Instituidos En Relacion Con La Agricultura (FIRA) plans to issue 3-year bonds paying a spread to the TIIE. Proceeds would fund operations. Established in 1954 by Mexico’s federal government, FIRA offers credit and guarantees among other services to livestock, fishing forestry and agribusiness sectors in Mexico. Banamex, BBVA Bancomer and HSBC are managing the AAA rated transaction. In a May domestic market debut, FEFA sold MXP3bn in 3-year bonds at TIIE+25bp.
Ecopetrol Advances Local Debt Plans
Colombia’s Ecopetrol is seeking regulatory authorization to issue domestic bonds in order to increase its financing options, says a source familiar with the state oil company’s plans. Companies that register can issue within three years, the source says, adding that the request for authorization doesn’t necessarily mean a deal is on the way. The state-controlled Colombian oil producer – one of the few local non-financial issuers to make use of the local markets – last issued domestically in 2010, selling $556m-equivalent in 5, 7, 10 and 30-year bonds.
Credito Real Plots Share Listing
Mexico’s Credito Real has joined the list of prospective Mexican equity issuers and is targeting an IPO, according to regulatory documents. The specialist in payroll, group microbusiness and durable goods loans plans an offering with US and Mexican tranches, but does not indicate size or timing. The sale is to include primary shares as well as secondary shares sold by investors including Nexxus Capital – the largest holder with 18.3% – and a fund linked to Banco Invex. Deutsche Bank and Barclays are managing the international portion, joined by Banorte-Ixe on the domestic tranche. Proceeds are for general corporate purposes. Targeting Mexico’s underbanked lower and middle classes, Credito Real grew by 63% during 2009-2011, and booked revenue of MXP1.0bn ($78m) in the 12 months to June 30. Founded in 1993, it has funded itself through investment such as Nexxus’, in 2007, and in the local debt markets. Last year it acquired payroll lender Credifel. Credito Real was heard considering an IPO since at least last year, but may find conditions more receptive to Mexican issuers if strong economic forecasts continue for Mexico and larger equity deals from the likes of Santander Mexico, Mexichem and Pinfra go well.
Global Bank to Reattempt Covered Bond
Panama’s Global Bank is heard starting investor calls for a covered bond offering as it targets a $200m sale as soon as Thursday, with the tenor still to be determined. The sale, a revival of a previous attempt in May, would be the first issue of a covered bond in Latin America. The transaction is being led by Deutsche Bank and HSBC. Backed by a cover pool of residential mortgages denominated in USD and located in Panama, the sale received a Baa3/BBB minus rating, above Global Bank’s Ba1/BB+ default rating. In May, the lender had been looking at a $200m 5-year bond at a 5.00-5.25% yield.
Petrobras Returns to Europe
Petrobras has raised more than $3.3bn-equivalent during its second visit to the European and Sterling bond markets. Diversifying funding sources away from USD as it addresses $235bn in capex needs, the Brazilian state-controlled oil producer was seen pricing at levels for the most part competitive to its EUR, GBP and dollar curves. A EUR1.3bn ($1.68bn) 2019 tranche priced at 99.398 with a 3.250% coupon to yield 3.357%, or mid-swaps plus 212.5bp, the tight end of 215bp (+/- 2.5bp) guidance. A EUR700m 2023 tranche priced at 98.154 with a 4.250% coupon to yield 4.466%, or mid-swaps plus 257.5bp, the tight end of 260bp (+/- 2.5bp) guidance. In the sterling market, Petrobras priced a GBP450m ($730m) 2029 bond at 97.472 with a 5.375% coupon to yield 5.610%, or Gilts+320bp, the tight end of 320bp-330bp guidance. Bankers on the deal calculated flat to five basis points concession for all three tranches to their repective curves. “Petrobras’ Euro 10-year looked roughly flat to their USD curve before swap charges – so a solid outcome in terms of relative pricing versus USD and diversification of funding,” notes a LatAm DCM banker away from the deal. While seen as tight to the EUR and GBP curves, there was less consensus on attractiveness versus the USD. “Petrobras got great pricing versus Euros and Sterling and would like to have priced flatter to the dollar curve given the basis swap relationship. But the outcome was still very successful,” says another banker. “The deal is fair and not cheap enough to encourage dollar-based investors to make a switch for a handful of basis points because of the lack of liquidity of EUR and GBP,” says a London-based portfolio manager following the deal. Demand was heard to be roughly EUR3.8bn for the 2019, EUR2.4bn for the 2013 and more than GBP900m for the Sterling portion. Bankers note the issuer is keen not to saturate the dollar market, and transaction took advantage of European investors hungry for Euro-denominated fixed-income transact
S&P Negative on Bahamas
S&P has revised the outlook on the Bahamas’ BBB rating to negative from stable, it says, based on a deteriorating fiscal profile. The agency sees a government fiscal deficit of about 6.7% of GDP for the fiscal year ending June 2013. It cites a low tax revenue base, and the unlikelihood of any significant reform to increase revenue. It also sees a rise in net general debt to 45%-47% of GDP in 2013-2014 from 41% in 2012. Failure to address the debt and the deficit issues could lead to a rating downgrade.
Bancomer Taps Tier 2
BBVA Bancomer emerged Monday to add $500m to its 2022 Tier 2 bond. With demand reaching $1.5bn from approximately 105 accounts, the Mexican bank reopened the 6.75% coupon bonds at 109.89 to yield 5.45% or UST+373bp, tight to 5.50% guidance. The A3/BBB sale offered investors 12bp-13bps concession, bankers on the deal say. Proceeds will be used to strengthen the bank’s capital structure and for general corporate purposes. BBVA, Bank of America Merrill Lynch and Goldman Sachs managed the transaction. Bancomer sold the original $1bn in 2022 subordinated Tier 2 bonds in a July transaction.
ECM Awaits Santander Mexico IPO
Santander Mexico is hoping recent supportive signs in the equity markets translate into a successful IPO, when it prices the highly-anticipated MXP49.01bn-MXP56.61bn ($3.72bn-$4.30bn) deal this evening. The well-regarded bank is heard with a book multiple times oversubscribed, with both bankers and investors citing strong equity funds flows last week following European Central Bank and US fed announcements as a positive sign. The close of a $5.17bn tender for shares of Brazil’s Redecard could also mean excess funds looking for reapplication to LatAm financial stocks. As with all equity deals, though, investors say it will come down to price. “The market is ready and people will be receptive. This could be expensive, but Mexico is expensive,” says a London-based EM portfolio manager looking at the deal. Most investors see a pickup to Banorte, the closest publicly-traded comparable, with Banorte trading at 12x 2013 price/earnings and Santander seen offering 10x-11.5x at the price range it gave at launch. “Given the interest, they can price at the top of the range. It is a good banking franchise, but we like to see a margin of safety,” Maclovio Pina, senior equity analyst at Morningstar, tells LatinFinance. His shop finds fair value at MXP29.00 per share, at the low end of the MXP29.00-MXP33.50 price range, a valuation hinging on the bank’s ability to control its main cost pillars while its balance sheet expands going forward. Valuing the bank at more than $17bn, Santander will offer 1.69bn secondary shares, including a 15% greenshoe. The deal is divided into an international tranche of up to 1.18bn shares in the form of ADRs, representing 80% of the total transaction, and a Mexican portion made up of 294m shares. Bankers away from and on the deal say the region’s new issue markets need a well-bid sale pricing at the midpoint or higher followed by strong aftermarket performance to have a hope of opening up the market wider for other new deals. However, even a very succ
Bancolombia Extends Early Tender
Bancolombia has extended the early deadline on a tender offer for its 2017 bonds until the October 5 full expiration date, it says. Earlier this month, the bank launched the exchange offer targeting the $400m outstanding in the 6.875% 2017 subordinated bonds, aiming to replace them with new 5.125% 2022 subordinated bonds, fungible with the notes it sold for cash in a recent $1.2bn offering. The lender is offering holders the new bonds at a rate of $1,135 per $1,000 principal amount, and says holders representing 47% have accepted the offer already. Bank of America Merrill Lynch, Citigroup and Morgan Stanley are managing the process. The Baa3/BBB minus lender sold the 2022 Tier 2 bonds earlier this month at a 5.20% yield through the same banks.