Latin Finance - January/February 2011 - 36

DEALS of the YEAR
2010

be restricted to investment grade ﬁxed income investors, adds Padilla. Liquidity is not seen as a risk for buy and hold or long term investors, according to analysts. Investors are conﬁdent that several houses would trade the bonds, as a lot of investors are following the name. The government is a signiﬁcant net creditor with a highly-regarded ﬁscal rule and good payment record, so there are not signiﬁcant risks associated with the bonds, according to Chamie. The threat of a commodities dip on bonds is also seen as mild. LF

Quasi-Sovereign Bond
BNDES

razil’s BNDES has become a regular in the DCM after returning in 2008 from a 10-year hiatus. It has needed to be, what with it almost single-handedly propping up the long end of Brazil’s lending curve. In September, it tapped into growing global enthusiasm for the sovereign by hitting up euro accounts for the ﬁrst time. “The issuance of euro bonds allowed BNDES to diversify its investor base, representing the ﬁrst LatAm ﬁnancial institution or development bank to access the euro market since 2007,” says Sérgio Foldes, BNDES’ director of capital markets. “BNDES successfully established a new funding market as well as created a benchmark for Brazilian quasi-sovereign risk in euro, which may serve as a reference for future Brazilian euro transactions.” The €750 million 2017 priced at 99.298 with a 4.125% coupon, to yield 4.243%, or euro mid-swaps plus 200 basis points, in line with initial price talk of 200 basis points area. Five to seven year maturities are more common in the euro-denominated market. BNP, Credit Suisse and Deutsche Bank managed the sale. The bond traded at 100.75 mid-November.

Going Continental B

It generated more than €2.0 billion in orders. This, despite some on the buyside comparing it to better paying sovereign options – the likes of Spain and Greece had widened during the year – in the euro region. Pricing was tight to the BNDES dollar 2018s at the time, according to investors, which had been at the equivalent of around 210-215 basis points. Bankers on the deal spotted the dollar 2018 at 215 basis points, noting it was able to price inside, mainly due to strong demand for the name. “BNDES was able to price at an attractive level to where it could have theoretically priced a new US dollar seven-year benchmark bond o ering,” Foldes says. At mid-swaps plus 200, it was about 20-25 basis points through a theoretical BNDES dollar seven-year new issue on a mid-swaps basis, he adds. “BNDES priced only 35 basis points over a theoretical Brazil sovereign euro seven-year new issue,” says Foldes. The Brazil sovereign had not issued in euros since 2005, when it sold a 2015 bond. It traded at mid-swaps plus about 100 basis points at the time of the BNDES issue, according to a banker on the deal. The euro option has become attractive for the region’s issuers this year after years of slim ﬂow, as lower interest rates have made costs more competitive. Mexico, Vale, América Móvil and Votorantim tapped the market in 2010, and more are expected to follow. “Euros are here to stay,” says Jake Gerhardt, EM syndicate director at Deutsche Bank. Just as with investors in the US, the search for yield is making European investors take notice of Latin credits, especially after many have done well through the 2008-2009 crisis. The key to marketing a trade there is ﬁnding acceptable European comparables, he says. The challenge, as it is for all ex-dollar markets, is for funding costs in euros to remain attractive, bankers say. Issuers also must return enough to overcome investors’ fears of illiquidity versus dollar curves, a problem in the past. LF

Corporate Issuer
América Móvil

mérica Móvil (AMX) is a frequent star of LatAm issuance, beloved by investors despite its razor thin spread and feared by bankers for its rigorous execution standards. The incorporation last year of fellow Carlos Slim companies Carso Global Telecom and Telmex International streamlined the family of telecom companies and gave AMX even more leverage to price bonds on three continents. The Mexico-based wireless operator announced in January the plan to absorb the units, improving its competitive edge versus other international players. It

Calling on the World A

Dynamic: CFO Carlos García Moreno aimed to boost its ability to deliver new data by leveraging ﬁxed lines, and create what the company says is the eighth biggest telecom globally by revenue and third by market cap. AMX swapped Carso Global Telecom shares at 2.05 AMX shares for every CGT share, giving AMX the 59.4% stake in Telmex that belongs to CGT and a 60.7% stake in Telmex International (Telint). It tendered publicly for the outstanding

36 LATINFINANCE

January/February 2011

Latin Finance - January/February 2011

Table of Contents for the Digital Edition of Latin Finance - January/February 2011