Direcional Prices FO at Discount

Brazilian homebuilder Direcional Engenharia has priced a BRL354m equity follow-on at a 14.7% discount to Tuesday’s closing price amid a difficult week for LatAm equities. Direcional shares had dropped 6.2% during the day Wednesday, and the issuer was unfortunate to price on a day when policy remarks by finance minister Guido Mantega sent the Bovespa index down 2.4%. Direcional priced 25.0m primary and 7.2m secondary shares at BRL11.0, compared to a BRL12.9 closing price. The shares sold include the exercise of a 15% greenshoe. Direcional president Ricardo Valadares Gontijo and Ana Lúcia Valadares Gontijo sold the secondary shares. About 30% of the proceeds are marked for land acquisition, 50% for developing projects and the remainder for working capital, according to the prospectus. Bank of America Merrill Lynch, Itau, BTG and Santander managed the sale. The additional shares should bring stronger levels of liquidity to the stock, which has typically seen less than 50 trades per day, according to data from Economatica. The discount follows more bad news for LatAm equities which lost $364m for the week ending February 2 according to EPFR. Last week, Mexico’s first REIT failed to price after Grupo E’s financial backers pulled the deal, citing cheap pricing. Meanwhile, Queiroz Galvao priced a $1.52bn IPO, landing BRL4.00 below the bottom of its target price range at BRL19.00, almost 27% short of the mid-point. Brazil’s Autometal also had to cut the price of its BRL484.8m IPO last week, selling at BRL14 per share versus a range of BRL17-BRL21, on the same day that Brazil Brokers priced 21.8m shares at BRL7.90 in a follow-on, a 2.6% discount to Wednesday’s BRL8.11 closing price.