Latin Finance - January/February 2012 - 36

It was also important that the deal was not exclusively seen as a play on Brazil, where 50%-plus of the revenue is generated. Listing in Argentina – where Arcos is based – was not an option. While not right for everyone, New York listings are increasingly becoming an option for the region’s issuers looking to expand their investor bases. Such tactics clearly worked. The deal was 10 times subscribed and drew participation from investors of all stripes, including the hedge funds absent from many of the other IPOs in the region. Arcos had initially planned to o er 50 million secondary shares, before upsizing to 64 million secondary shares. The issuer had also planned to o er 12.4 million primary shares, but it only issued 9.5 million, since the above-range price per share allowed it to reach its primary proceeds target. “Most of LatAm passed, and you had US investors and retail investors buying this deal,” says André Maciel, a vice president at JPMorgan. “That is what took the price to where it is.” He notes there were more than 600 accounts, what he calls a record by far. Controller and CEO Woods Staton, who led the purchase of McDonald’s LatAm operations along with private equity money in 2007, bought 2 million of the primary shares, and was left with a 38.6% economic and 75.5% voting stake in the company. The price represented a 23.3 times estimated 2011 price/earnings ratio, according to bankers on the deal, who compare the valuation to McDonald’s at 9.4 times and Yum brands at 9.4 times. The success of the IPO and the strong aftermarket performance enabled the private equity investors to take their planned exit in October, raising a $976.8 million follow-on when few other deals were coming to market. The McDonald’s operator followed the IPO by jumping on the global real bond train in July. Arcos squeezed guidance several times during the sale process for the 400 million real deal thanks to a book that peaked around 3.6 billion reais and ﬁnished at 3.25 billion reais. The bond priced at par to yield 10.25%. Though a 3.6 billion real order book

meant Arcos could have raised more, the borrower appeared content to sacriﬁce size for pricing. The popularity of the credit stands out, as the window for global real issuance closed up soon after. The funds went for general corporate purposes, capex and the possible unwinding of cross currency swaps. BAML, Itaú BBA, and JPMorgan managed the sale. Global real bonds were a popular theme in late 2010 and in the ﬁrst half of 2011, with issuers jumping at the chance to fund in local currency, as the size and costs ﬁnally began to make sense. The outlook for 2012 is less clear, as investors – liking the tightening prospects of the real in the early part of 2011 – began to take a di erent view when local currencies reversed trend and widened on global events in late 2011. The demand for both the IPO and the global real bond speak to the continued interest in Brazil’s and the region’s growing purchasing power of the middle class. Though it is no longer the-anythinggoes climate of 2006-2007, there is still ample fundraising opportunity for quality issuers set to take advantage of rising incomes. LF

Barbassa. “We used the same strategy in the euro and sterling markets.” Among non-sovereign issuers, the $6 billion size trails only a $7.5 billion 2007 sale from Venezuelan state-owned oil company PDVSA and essentially marks the largest EM corporate bond o ering ever to

Positive investor feedback: Barbassa be placed into the international markets, bankers say. It also matches the biggest oil and gas dollar o ering ever, tying with Conoco Philips’s $6 billion bond in January 2009. The deal ﬁrmly solidiﬁes Petrobras’s position as a global high-grade issuer at a time when it will need to raise anywhere between $7 billion-$12 billion in new money over the next ﬁve years. Aware that the dollar markets are an important funding source for such needs, Petrobras has made it clear to investors that this will only be a yearly event. “Feedback from investors is that they are happy with the procedure, and we intend to continue this [way] in the dollar market,” Barbassa adds. The strategy seems to have worked so far, and investors were keen to buy a credit that hadn’t been in the market since 2009. “The scarcity value generated a sizable order book and made it easy to have phenomenal results,” says Luiz Guilherme Silveira, vice president for Americas DCM at Santander, which led the transaction along with Citigroup, HSBC, JPMorgan, BTG Pactual and Itaú BBA.

Petrobras’s $6bn Three-Tranche Offering

Quasi-Sovereign Bond

Breaking Records
etrobras’s record-breaking $6 billion three-tranche deal in January 2011 proved to be the splashiest of quasisovereign trades in 2011 when it became the largest-ever corporate issuance from a Brazilian company. Large and multifaceted trades that come once a year are now part of the oil company’s strategy in the US dollar market as it tries to balance its enormous ﬁnancing needs while satisfying investor demands in its core market. “This was an important transaction for Petrobras,” says the company’s CFO Almir

36 LATINFINANCE

January/February 2012

Latin Finance - January/February 2012

Table of Contents for the Digital Edition of Latin Finance - January/February 2012