Turbulence Grounds Azul IPO, Concerns Others

Brazil’s Azul has cancelled registration for an IPO, according to the CVM, as difficult market conditions challenge Brazilian equity issuers who have been counting on a peaceful September. The long-awaited IPO of the Brazilian airline – said to target as much as BRL1bn ($415m) – was to include local and SEC-registered portions. “The market is very difficult at the moment and the company is waiting for a better window,” an investor relations official says. Others in the pipeline could still press ahead, with fleet rental provider Unidas heard meeting investors this week pre-launch. “The environment is challenging and investors are very selective, but that has been the case all year,” says one ECM banker, noting that there are still issuers that want to be in a position to take advantage of any calm in September or October. “There was the expectation that the market would be open in September, but that is not unfolding as we expected,” says another. Particularly unhelpful is the real widening out to close at BRL2.41 per USD Monday. Banco do Brasil, Goldman Sachs, Itau, Morgan Stanley and Santander had been managing the Azul transaction. It is one of four Airlines in the region hoping to issue equity, with Mexico’s Volaris filed for an IPO and Latam Airlines for a follow-on. Avianca has not yet filed, but is considering a follow-on. In Brazil, Unidas and fellow vehicle rental specialist Ouro Verde lead the IPO pipeline. Despite the concerns, ECM volume in the region has been encouraging, at least compared to recent years. Issuers have raised $29.53bn from 59 deals through Monday, according to Dealogic data, already topping last year’s $26.18bn full-year total. Brazilians have accounted for $11.76bn so far in 2013, topping the 2012 full-year total of $9.14bn.