Latin Finance - November 2008 - 37

of the 2008 the unconditional availability and use of its parent’s balance sheet. For large projects and M&A in particular, this would give it a critical competitive advantage. The investment banking unit has and plans to continue to tap Bancolombia for this, but the process requires approvals, says Velásquez. “We have discussed the possibility of doing [syndicated lending] with the bank and have said to them that we want to do this. Historically we’ve had to convince Bancolombia to lend to a given borrower.” Since Bancolombia is familiar with its investment banking arm’s work, approving a deal can take as little as two weeks, says Pérez. Large loans for corporate purposes often take longer at other places whose home offices are in Europe or Asia, he adds. This restricts the investment bank’s role in most deals to structuring agent rather than bookrunner or lead arranger. Advisory and structuring roles are generally a more lucrative use of a bank’s resources. And syndicated lending is still not a common practice in Colombia, so sizable loans must be evaluated on the assumption that the facility will be held until maturity. The bank is currently engaged as financial advisor to Termoflores, which is looking to syndicate a $270 million loan with international banks to expand capacity at a Baranquilla-based gas-fired plant. CAF and IFC have been tapped as arrangers and lenders. One of Bancolombia’s drawbacks versus international competitors is a limited ability to distribute capital markets deals overseas. As a Colombian shop, it is restricted to dealing with local investors. Large clients that need international distribution end up choosing banks with New York-based teams that can advise on market conditions and place deals with a global buyer base. “The deals we tend to work on are those that don’t require international distribution,” says Pérez. It will look to partner with larger global shops to help an issuer place abroad, he adds. Within Colombia, Bancolombia claims to be the top issuer in commercial paper and local debt, though it has not yet placed an international bond. In M&A, the shop is similarly restricted to advising on domestic transactions, since it lacks global industry expertise that clients turn to competitors for. Regional Push Nonetheless, as Colombian corporates seek to broaden their reach into surrounding countries, Bancolombia claims it is the premier choice for locals moving abroad. “We count on them for support outside Colombia,” says Dib, adding the bank has begun moving into Central America through its acquisition of Banco Agrícola in El Salvador and by establishing a presence in Panama. “We are very prudent but fast,” says Rodrigo Velásquez Uribe, CEO of Bancolombia Banca de Inversion “We have two Colombian clients looking at two separate acquisition opportunities in Peru,” notes Pérez, who claims the bank plays a very active role in its neighbor to the south. Among deals being considered for Colombian clients is the placement of socalled Inca bonds, or local soldenominated notes issued by nonPeruvians. Earlier this year, Citi helped GNC place $40 million equivalent in 10year local bonds, heard carrying an all-in cost of 8%-9%. Bancolombia says it would rely on partnering with local Peruvian underwriters for this type of deal, as it does not yet have local placement capabilities. On this front, as in the financing arena, Bancolombia faces steep competition. Credit Suisse, for one, is a significant rival for its ability to structure financings and provide swift balance sheet support for cross border deals. In the period under consideration, the Swiss shop led significant financings for the Colombian government, and has snagged M&A mandates for important local names like El Tiempo, which sold a controlling stake to Spain’s Grupo Planeta. It also arranged financings for Avianca – a $35 million future flow-based loan – and ITSA, which obtained an $85 million seven-year facility to purchase Termotasajero, a power generation company. Credit Suisse is also advising Argos on its sale of Carbonos del Caribe, and was among the banks that helped lead Ecopetrol’s record breaking $2.8 billion IPO. On that deal, Bancolombia played the leading role as placement agent, thanks to overwhelming interest from local investors. If the Colombian shop continues to score high profile mandates such as El Dorado and Ecopetrol, it could eventually succeed in branding itself as one of the top investment banking franchises for the Andes and Central America. It must stick to its strengths within Colombia while continuing to build out cross border underwriting and M&A. As the global investment banking industry is reduced to a smaller, less ambitious version of itself, Bancolombia sees an opportunity to fill the growing void. “Banks are leaving the region and this is a good opportunity to be more aggressive in our strategy to move into Central America and other parts of LatAm,” says Pérez. He notes that the bank is generally conservative but has identified a low-risk way to expand. Bancolombia still has a hefty set of competitors who will fight harder for a diminishing fee pool. While being local has its advantages, Bancolombia will have to raise its game to sustain momentum. LF November 2008 LATINFINANCE 37

Latin Finance - November 2008

Table of Contents for the Digital Edition of Latin Finance - November 2008