Latin Finance - November/December 2011 - 32

loan syndications

French banks announced cost-cutting terms of volumes.” costs jump on investors’ worries about measures, a scaling back in certain The Royal Bank of Scotland’s decision how a Greek default and falling debt business and asset sales. in October to beat a retreat in Brazil and prices in peripheral euro-zone countries This has raised questions about how let much of its investment banking team might impact balance sheets. some European banks will proceed in there go is an example of how banks are By August there was talk of spreads Latin America, where for instance, French rethinking their strategies in the region. reaching a trough when Brazilian banks have been considerably active conglomerate Votorantim Participações Mood Change lenders in the infrastructure and project closed its multi-tranche $2.65 billion and Indeed the mood has changed finance space. it failed to lure the long list of banks seen dramatically since earlier this year, when The notable absence of French on the Vale trade. banks were falling over themselves to lend banks on OSX’s recent FPSO financing Further cracks appeared in late to clients, especially blue-chip names, as is just one example of what could be a December, when Telemar was forced they sought to put money to work and powerful trend in coming months. Some to downsize its five-year revolver to $1 gain ancillary business. are predicting that this could billion from $1.5 billion, albeit encourage an increasing shift at the same tight spread of Libor from bank financing to bonds. plus 90 basis points brought to LatAm Corporate Syndicated Loan Volume ($bn) It may be a different story banks at launch. Higher, but not where it was for European banks with a Borrowers have clearly 60 broad on-the-ground presence, thrown in the towel and are no which have stable funding longer pushing banks for lower 50 sources through local deposits pricing in this environment. and are not seen as being Such sentiments were clearly 40 as disruptive to the region. in evidence when Mexican “Generally speaking they petrochemical company 30 are mostly independent in Petrotemex held bank meetings the way they are capitalized in October to extend the 20 and funded,” says Matteo maturity on a $600 million Ramenghi, European bank bullet loan originally used to 10 analyst at UBS. fund the company’s acquisition Nevertheless, the broader of Eastman Chemical’s PET 0 uncertainty, high funding costs business in the US. 2006 2007 2008 2009 2010 2011* and the retreat of certain banks The idea is to convert the *through October 25 from the region will impact bullet into a five-year amortizer, Deals of $100m-equivalent or greater lending dynamics in Latin but leave the Libor plus 300 Source: Dealogic America. basis point spread alone. “Six Brazilian mining giant Vale set the “It will probably result in greater months ago, they would have extended ball in motion in March with a $3 billion, discipline in terms of pricing and maturities and lowered pricing,” says one five-year revolver that carried an initial transaction terms as banks in general banker. applicable margin of just Libor plus 65 have to meet more stringent capital The next wave of borrowers may not requirements and returns on that capital,” basis points, sparking a flurry of similar be as lucky as Telemar or Petrotemex trades among both Brazilian and Mexican and will have to adjust to a new reality of the senior US banker adds. “This will high-grade names keen to jump through make banks more selective and push up tighter structures and wider margins. This this window of opportunity. the returns they require.” could be painful given the refinancing At the time, bankers questioned Much will depend on how financial schedules due over the next few years. For whether it made sense to participate amid now, bankers are feeling their way around institutions cover the shortfall in capital, speculation that some institutions were but one result could be a decrease in in a sort of no-man’s land for pricing, lending, says Neil Smith, an equity analyst already lending below funding. given that margins on existing deals were Steel company Usiminas, conglomerate negotiated before worries about Europe at WestLB. Banks like to gain exposure to Votorantim, telecom América Móvil, and emerging markets where risk profiles are fully impacted sentiment. the federal electricity commission CFE better, but political pressures may force With sentiment changing rapidly, them to abandon businesses abroad rather were just some of the names that took this bankers are often left holding debt that route, with some even returning to flex than cut back at home, he says. simply doesn’t reflect market pricing, Smith points to banks in the UK which pricing lower as Mexican state-owned oil leaving a tinge of buyer’s remorse, company Pemex did in August. have lending quotas they must fulfill at especially on revolvers that companies However, bankers have become home, and “therefore the business they’re naturally have drawn upon to take writing in emerging markets is suffering in increasingly less compliant as funding advantage of cheap rates. LF

32 LatinFinance

November/December 2011



Latin Finance - November/December 2011

Table of Contents for the Digital Edition of Latin Finance - November/December 2011

Latin Finance - November/December 2011
Contents
Contagion Risk
Mexican Credit
China Investment
Loan Markets
Mexico Banks
Sub-Sovereign Debt
Banks of the Year 2011
Argentina Investor Report
Reversal of Fortunes
Latin Finance - November/December 2011 - Latin Finance - November/December 2011
Latin Finance - November/December 2011 - Cover2
Latin Finance - November/December 2011 - Contents
Latin Finance - November/December 2011 - 2
Latin Finance - November/December 2011 - 3
Latin Finance - November/December 2011 - 4
Latin Finance - November/December 2011 - 5
Latin Finance - November/December 2011 - 6
Latin Finance - November/December 2011 - 7
Latin Finance - November/December 2011 - 8
Latin Finance - November/December 2011 - 9
Latin Finance - November/December 2011 - 10
Latin Finance - November/December 2011 - 11
Latin Finance - November/December 2011 - Contagion Risk
Latin Finance - November/December 2011 - 13
Latin Finance - November/December 2011 - 14
Latin Finance - November/December 2011 - 15
Latin Finance - November/December 2011 - 16
Latin Finance - November/December 2011 - 17
Latin Finance - November/December 2011 - 18
Latin Finance - November/December 2011 - 19
Latin Finance - November/December 2011 - 20
Latin Finance - November/December 2011 - 21
Latin Finance - November/December 2011 - Mexican Credit
Latin Finance - November/December 2011 - 23
Latin Finance - November/December 2011 - 24
Latin Finance - November/December 2011 - 25
Latin Finance - November/December 2011 - China Investment
Latin Finance - November/December 2011 - 27
Latin Finance - November/December 2011 - 28
Latin Finance - November/December 2011 - 29
Latin Finance - November/December 2011 - Loan Markets
Latin Finance - November/December 2011 - 31
Latin Finance - November/December 2011 - 32
Latin Finance - November/December 2011 - 33
Latin Finance - November/December 2011 - Mexico Banks
Latin Finance - November/December 2011 - 35
Latin Finance - November/December 2011 - Sub-Sovereign Debt
Latin Finance - November/December 2011 - 37
Latin Finance - November/December 2011 - Banks of the Year 2011
Latin Finance - November/December 2011 - 39
Latin Finance - November/December 2011 - 40
Latin Finance - November/December 2011 - 41
Latin Finance - November/December 2011 - 42
Latin Finance - November/December 2011 - 43
Latin Finance - November/December 2011 - 44
Latin Finance - November/December 2011 - 45
Latin Finance - November/December 2011 - 46
Latin Finance - November/December 2011 - 47
Latin Finance - November/December 2011 - 48
Latin Finance - November/December 2011 - 49
Latin Finance - November/December 2011 - 50
Latin Finance - November/December 2011 - 51
Latin Finance - November/December 2011 - 52
Latin Finance - November/December 2011 - 53
Latin Finance - November/December 2011 - 54
Latin Finance - November/December 2011 - 55
Latin Finance - November/December 2011 - 56
Latin Finance - November/December 2011 - 57
Latin Finance - November/December 2011 - 58
Latin Finance - November/December 2011 - 59
Latin Finance - November/December 2011 - 60
Latin Finance - November/December 2011 - Argentina Investor Report
Latin Finance - November/December 2011 - 62
Latin Finance - November/December 2011 - 63
Latin Finance - November/December 2011 - Reversal of Fortunes
Latin Finance - November/December 2011 - Cover3
Latin Finance - November/December 2011 - Cover4
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