Homebuilder Follow-On Fates Diverge

Two Brazilian homebuilders priced follow-ons last night, but only one emerges victoriously. PDG Realty and Rossi Residencial operate in what investors are calling a positive environment for Brazilian homebuilding, given strong internal demand, falling interest rates and a robust low-income initiative by the government. But PDG, whose stock has more than doubled since its IPO, is the only one of the two that has consistently drawn investor praise in the days leading up to pricing. In line with this sentiment, the company priced 67.2m shares yesterday at BRL14.00, a 2% discount to the close. It saw an order book worth some 4x the issue and was able to upsize the offering by 11.2m shares, say bankers on it. Another 8.4m shares are expected to be traded into the market by the underwriters BTG Pactual, Itau BBA, Goldman Sachs and BofA Merrill. That would bring gross proceeds to BRL1.06bn. Rossi Residencial’s fate is quite different. The company’s stock took a 6.6% walloping on the day of pricing as investors sought to reposition ahead of what was expected to be a challenging pricing, speculate bankers off the trade. That drop is well below the Bovespa’s 1.7% loss on Thursday. Rossi’s shares were priced at BRL12.50, according a statement posted on the CVM’s site. That’s a 6% discount to the BRL13.30 closing price and a 12.3% discount to Wednesday’s close. The statement says the company exercised a hot issue of 11m shares, bringing the total offering to 66m shares, resulting in gross proceeds of BRL825m, plus greenshoe shares that could raise an additional BRL104m for the company. One investor watching the deal says Rossi was heard to have barely covered its book one time by the close at a discount of 5% discount. Bankers on the Rossi trade did not return request for comment. Credit Suisse led the Rossi deal, with Bradesco BBI and Santander as joint leads.