Latin Finance - April 2008 - 4

Debt BA Beauty Contest Turns Ugly Borrowers Repelled Banks continue to demand juicier margins on loan syndications to compensate for a higher cost of funds. Peru’s Pitching to lead the City of Buenos Aires to the international Interbank increased the margin on a $200 million three-year bond market got ugly on fees, according to bankers who loan. The deal, launched in early March via Standard competed for the expected $500 million issue. At least one Chartered as a working capital step up, has been broken into consortium allegedly slashed commissions to rock bottom to two parts: a $100 million trade facility at 80, 85 and 95 win the mandate. A group including Citi, Barclays and basis points over Libor in years one, two and three, Banco Macro is heard to have won by offering to underwrite respectively, and a $100 million working capital facility at for just 3.5 basis points, according to bankers at competing 100, 110 and 120 basis points over Libor. Participants can shops. If divided evenly among the leads, that translates into expect fees of 35 basis points plus an additional five basis little over $58,000 per bank, before lawyer and transaction points for early commitments. costs. Originally, pricing for the entire facility, made up entirely A banker understood to be part of the lead consortium of working capital, was 80, 85 and 95 basis points over declined to confirm fee specifics, or that his shop had won, Libor, respectively. This was the fourth time a LatAm bank but admitted the process was very competitive and that the had flexed up pricing on a loan this year, and follows figure his group pitched was compressed. Historically in Unibanco, which took a $250 LatAm wafer thin fees translate into million facility to retail at new poor execution and lack of DCM Rank by Volume, Year to March 24 levels. aftermarket support, which in the Credit Suisse holds a lead end can be much more costly for an issuer. The transaction is likely to Rank Bookrunner Value $m # deals be in dollars and proceeds are for Mexican electric utility CFE made 1 Credit Suisse 1,543.39 3 infrastructure. little progress with a $2 billion 2 BBVA 1,362.29 11 three-year senior revolver it 3 Deutsche Bank 798.23 2 launched roughly a month ago to 4 Scotia Capital 603.17 3 arrangers. As of late March, the Chile will offer a 30-year local bond 5 Banorte 556.74 2 facility, which pays 40 basis points as part of the $1.1 billion 6 Merrill Lynch 548.38 1 over Libor, had secured $100 equivalent in local debt it plans to 7 Ixe Casa de Bolsa 506.61 3 million commitments from just issue this year. That would be the 8 Citi 453.22 2 two MLAs. One of those was first domestic offering of that tenor, 9 Santander 401.96 5 SocGen, say bankers away from catching up with Mexico, which led 10 HSBC 396.49 4 the process. Fees for $100 million the way in developing local market Subtotal 7,170.48 30 tickets are 30 basis points, and for tenors. Chile plans to issue $460 Total 11,733.72 90 $150 million tickets, 35 basis million equivalent in the 30-year Source: Dealogic points. denominated in the UF inflation“Not everyone in the market is linked unit in 2008. happy with the pricing,” says a banker close to the Meanwhile, Mexican oil giant Pemex plans to raise $5 syndication. Indeed, a thin margin is heard to be the main billion in 2008, according to finance director Esteban Levin. cause for slow going on the transaction, in addition to harsh Some $2 billion will come from local and international market conditions that jacked up the cost of funds for many capital markets, with the balance from $1 billion in bank banks. “Pricing is the rub for CFE,” says a banker whose loans and $2 billion in ECA finance. Pemex is also shop is considering participating. While CFE is offering to considering liability management, says Levin. Amortizations pay well over the 25 basis points over Libor it sought last for 2008 are close to $4 billion. year, the margin is still viewed by many as tight given And Petrobras took to the road to patch up relations with market conditions. the buyside following a controversial pullback from the A banker on the CFE transaction says he believes the deal market in February. CFO Almir Barbassa met investors and will get done, and has managed to secure several statements talked about financing plans, which include placing $1-$2 of intention to commit from other banks. BBVA, RBS, BNP billion in the US market this year. and Santander are bookrunners, with Citi also participating In February, Petrobras yanked a $500 million retap of in a senior role. MLA commitments are heard due next 6.125% 2016 notes. One investor says the plan is to try a week, with retail participation due in two weeks. The highnew deal at that tenor again. Like most high-grade LatAm grade borrower may have to play the relationship card, issuers, Petrobras could bring a bond any time if it is willing especially since Vale was sucking liquidity out of the market to pay the going rate. Citi, HSBC and UBS accompanied the to support its purchase of Xstrata. LF issuer on the road. CFE Struggles Chile to Debut 30-year 4 LATINFINANCE April 2008

Latin Finance - April 2008

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