Latin Finance - July 2008 - (Page 11)

investment banking outlook well as its attempt at buying Xstrata; Gerdau, in multiple cross border acquisitions, and Usiminas in its $1.2 billion loan. ABN AMRO, Calyon, and Citi also won takeout mandates for a $1.2 billion bridge to Braskem. The message a bank sends by guaranteeing cheap, long term funds is indeed irreplaceable. So much so that even banks like Goldman Sachs, the quintessential broker-dealer and advisory expert, has recently emerged on the syndicated lending scene to curry favor with clients. Goldman participated in a $1.7 billion three year loan to CFE which pays a slim Libor plus 40 basis points, hardly the kind of yield that the white shoe bank is accustomed to. It was also spotted taking a ticket in a $500 million three year Gerdau facility at Libor plus 125 basis points. And it was also part of a four-bank lending group to Argentine private equity concern Eskenazi Group, which raised $1.1 billion for a stake in YPF. That highrisk play could result in a smattering of equity and bond mandates farther down the line. “We’re going to [deploy our balance sheet] very selectively,” says Kevin Kennedy, head of LatAm at Goldman Sachs. “In situations where . . . it is critical to developing a relationship, we’re going to evaluate whether it makes sense or not for us to participate.” JPMorgan, formerly a large lender, has been shifting its focus to higher margin business, but it could go back to deploying balance sheet. “That’s something we expect to do more of going forward – using our balance sheet to provide a one-stop shop,” says Nicolas Aguzin, head of LatAm investment banking. “What we’ve done so far has been achieved without using a significant amount of balance sheet.” Citi, JPMorgan’s universal bank counterpart, has by far been the most successful in the region when it comes to using its relatively vast warchest. It has long led the syndicated loan league tables, both in number of deals and by volume. On top of that, its bankers have sought out more complicated structures, tapping peso-denominated funds for leveraged and new issuers in Mexico and Peru. In the case of Dominican beer The Lending Game On the lending side, European players like BBVA, Calyon, BNP Paribas and ING offer balance sheet but struggle to compete for high margin investment banking business. HSBC and Santander, which is folding Banco Real into its Brazil operation, are in a better position as they bring enormous balance sheet, which is useful in large acquisitions, coupled with a growing array of investment banking products. This includes DCM, and in some cases M&A and equity expertise. The pair has earned big fees by lending to the region’s top corporates – including Vale in its purchase of Inco, as July/August 2008 LATINFINANCE 11

Table of Contents Feed for the Digital Edition of Latin Finance - July 2008

Latin Finance - July 2008 Contents Investment Banking Outlook Compensation Survey Colombia Investment Banking Borrowers vs. Investors Banorte Profile Braskem Financing Strategy Brazil Hydro Finance Peru Port Privatization Panama Money Flows Argentina Local Markets Guide to Banking Technology Who Said That?

Latin Finance - July 2008

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