Latin Finance - January/February 2012 - 40

made its mark in the international capital markets in May 2011. The 8.50% seven-year non-call four senior unsecured bond represented the largest-ever non-sovereign sub-investment grade transaction out of Latin America, possibly setting a benchmark for other exploration and production issuers. “This was uncharted territory,” says Michael Schoen, head of Latin American debt capital markets at Credit Suisse. “There had been no deal even close to this in high-yield.” Credit Suisse, HSBC and JPMorgan managed the transaction. Considered the largest nongovernment E&P company in Latin America, OGX both shocked and impressed as it successfully executed the debut jumbo bond transaction for a company in pre-production stage, setting a new precedent in the capital markets. The issuer initially embarked on a four-team three-continent roadshow, hawking a $2 billion seven-year non-call three, at 7.5% area. The deal’s B1/B+ rating was lower than OGX would have liked, but investors pushed back to get an additional 100 basis points, an extra non-call year and further restrictions on future leverage. “On a deal of this size you need penetration of both the high-yield and emerging market investor bases,” Schoen says, explaining the willing ﬂexibility of the issuer. Despite the haggling, the buyside was clearly keen, with more than 300 accounts putting in nearly $5.5 billion in orders that allowed for the $563 million upsize. Changes satisﬁed investors who now saw the deal as one of the most attractive last year, given the depth of experience of OGX’s management and the likelihood that the company would ﬁnd oil in the Campos basin. Investors also noted that the $32 billion market cap company with $5 billion in free cash would still have six times interest coverage even if it missed its 2013 target by 50%. The bond priced at par to yield 8.5%, or Treasuries plus 611 basis points. Proceeds are primarily to be used to develop Waikiki and Wiamea blocks in the Campos Basin and to fund development of other concessions. Other LatAm E&P startups will likely

have to wait for an improvement in conditions to know if they can follow OGX’s massive lead. LF

Corporate Liability Management
Braskem

Making the Grade
apitalizing on an upgrade to investment grade by Standard & Poor’s and Moody’s and favorable market conditions, petrochemicals company Braskem successfully replaced expensive notes due 2014, 2015, and 2017. Following the operation, Braskem walked away with a newly issued $750 million 10-year bond, and a much improved debt

of the 2020 bond Braskem issued the year before. Citigroup, Deutsche Bank and Santander managed the process. “For Braskem, this was the ﬁrst time they had accessed the market after getting investment grade,” says Andre Silva, co-head of debt capital markets for Latin America at Deutsche Bank. “It was a very visible and important transaction for them. We managed to price a $750 million 10-year with concession from zero to ﬁve basis points.” Some investors saw the concession at around 10 basis points. Either way, buyers were pleased at the time, as the price sensitive issuer was seen showing some ﬂexibility to get the deal done. They were also banking on Brazil’s growth story and on a third triple-B rating, which eventually was awarded by Fitch in November. The Brazilian petrochemical company had launched the tender o er for $775 million in outstanding bonds with April 15 as the deadline, but later extended the expiration date to April 20 to give outstanding bondholders an additional chance to participate. Braskem ended up buying back a total of $395 million in outstanding bonds. These included $165 million, or 66.30%, of its 11.75% 2014 bonds, $85 million (56.50%) of its 9.375% 2015s and $144 million (52.50%) of its 8.00% 2017s. Braskem was able to continue to use its full high-grade credentials to price a $500 million 30-year in July. LF

Syndicated Loan
Nemak

Paying low premium: Drehmer amortization schedule. “We eliminated previous references with competitive ones and paid a very low premium at the same time,” says Marcela Drehmer, Braskem’s chief ﬁnancial o cer. Braskem priced the new 2021 bonds ahead of the tender o er. It came at 98.14 with a 5.75% coupon to yield 6.00%, or US Treasuries plus 243 basis points, at the tight end of 6.000%-6.125% guidance. It also came about 125 basis points inside

Turning Around
M
exican auto parts maker Nemak’s $1.145 billion dual-currency loan stood out in many ways, but most importantly it marked a successful conclusion to its turnaround story. The loan was part of a reﬁnancing of restructured debt that allowed it to free up collateral, lower funding costs and loosen covenants so it could prepare for growth in the car sector.

40 LATINFINANCE

January/February 2012

Latin Finance - January/February 2012

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