Hybrid securities such as convertible bonds are a rarity in Latin America.  Latin American companies are suspicious of equity products, which would require them to cede at least some control of their companies. But NII Holdings Inc., a US-based provider of digital wireless communications services to businesses in Latin America, has proved that convertible debt offers Latin American businesses an attractive form of low-cost financing. Byron Siliezar, chief financial officer of NII Holdings, says, “The conversion premiums embedded in convertible securities are at a favorable premium relative to what they have been historically over the last several years.”

NII Holdings Inc. takes LatinFinance’s prize for Convertible Bond of the Year for its successful launch of a $150 million, 30-year convertible issue. The bond pays a coupon of 3.5% and has a conversion premium of 33%. The bond followed NII’s $210 million secondary offering of common stock on Nasdaq. The convertible offering was priced at a discount of 1.1% to the closing price on August 29, just 10 months after NII emerged from Chapter 11 proceedings in November 2002. NII’s stock price climbed over 500% last year. NII outperformed the Nasdaq composite index by 4.63% 90 days after the offering priced.

Morgan Stanley and five managers sold the convertible in the second week of September, when interest rates were low and investors were on the prowl for higher-yielding investments. “We priced it at the low end of the price range on the coupon and just above the high end of the conversion premium indicated,” says Jim Allen, executive director in investment banking at Morgan Stanley.

The company’s remarkable performance since the 2002 restructuring boosted interest. “They beat their first quarter and second quarter numbers so it was a good set up going into an equity offering,” says Allen. LF