Banorte Enters ECM Pipeline

Grupo Financiero Banorte is moving forward with an equity follow-on of up to $3bn, adding to the new issue pipeline as the broader markets face a challenging backdrop. The Mexican bank plans to hold the offer “as soon as” it receives approval, it says. It does not specify the exact timing or use of proceeds, though the announcement immediately follows Tuesday’s deal to buy out Assicurazioni Generali’s stakes in Seguros Banorte Generali and Pensiones Banorte Generali for $858m, and when the market is concerned about its capital levels. “Banorte needs to do this before the window closes. The best time would have been in the first quarter, after the Bancomer Afore purchase,” says an FIG equity analyst, referring to the group’s $1.6bn purchase of BBVA’s Mexican pension operation in November. He notes the bank has been at a “competitive disadvantage” with a core capital ratio around 10.6%, lower than the 15%-19% seen at other large Mexican banks, and that market conditions aren’t likely to improve. In a note, Fitch expects proceeds to be used for the Generali buy, to buy out the IFC’s stake in Banorte and to liquidate a credit facility used to buy BBVA’s Afore. The bout of US treasury yield movements and selloffs in EM equity markets may complicate life for some equity issuers coming in June and July, though bankers expect deals should still get done. “EM hasn’t been the flavor of the month, and the currency movements will challenge issuers to meet their targets,” says one ECM banker. Banorte’s planned deal – equal to about 20% of the bank’s market value – will feature both international and domestic tranches and could end up being Mexico’s largest this year and its biggest since Santander Mexico’s $4.1bn IPO in September.