LatinFinance - March/April 2014 - 10

NEWS
EQUITY

Brazilian telecom firm Oi is set to test the mettle of Latin America's equity
markets with a jumbo IPO. Fund outflows and emerging market jitters will
make it tough. By Katie Llanos-Small

Testing times

10 l atinfina nce.com - March/April 2014

ECM rank by volume, Jan-Feb 26, 2014
Slim pickings
Rank

Bookrunner

1
2
3
4
5
6
6
8
9

Value $m

# Deals

citi
larrainVial
credit Suisse
BtG Pactual
JPmorgan
Deutsche Bank
Bofa merrill
BcP (Peru)
itaú BBa

355
299
170
139
84
56
56
52
32

1
1
2
3
2
1
1
1
1

1,242

5

Total
Source: Dealogic

Rocky path
Performance of M&E
LatinFinance Index
150
140

M&E LF Brazil Stars Index

130
120
110
IBovespa index

100
90
80

1/31/14

5/31/13

9/30/12

Base=100, 12/30/09

1/31/12

70

5/31/11

January. Heavy local support
underpinned the transaction,
while international investors,
hammered by fund outflows,
wavered somewhat over
subscribing to the deal. Still,
the stock sale was close to three
times subscribed, and 27%
of the sale was sold outside
the country, in american
Depositary Share format.
two other chileans, Latam
Airlines and Geopark, have
been able to close deals this
year. But others have decided
to wait for better times.
mexican low-cost airline
Viva Aerobus postponed its
initial public offering slated
for mid-february, citing bad
markets. a few days earlier,
Brazilian brake-maker Fras-le
had postponed a follow-on and
mexico's Grupo Gigante had
done the same with the iPo
of Office Depot de México
which was targeting 4.5 billion
pesos ($333 million). Gigante

9/30/10

volatility with an agreement
from the investment banks
on its deal to underwrite the
transaction. LatinFinance
understands that, under that
agreement, the banks will only
subscribe to the deal once
a market clearing price has
been established - rather than
committing to support it at a
certain price - making them
price-takers rather than pricesetters.
other Brazilians have joined
the pipeline. Renewable energy
firm Renova, and water and
sewerage utility Sanepar had
filed documents for follow-on
sales by late february, while
data center operator Aceco
was targeting an iPo.
companies that are large,
liquid and popular are likely
to be able to sell stock at
reasonable prices through
follow-ons, but volatility
could hinder deals for smaller
companies and initial public
offerings.
Deals in the first two months
of the year largely support that.
a locally marketed follow on
for Bancolombia was heard
to be progressing adequately
in late february and was
expected to raise over $1 billion
equivalent for the lender.
that came after another bank
follow-on also found strong
demand. lQ inversiones
financieras raised 448.9 billion
pesos ($817 million) from its
sale of 6.7 million Banco de
Chile shares, in spite of a
rocky market backdrop in late

1/31/10

Brazilian telecom Oi is hoping
to raise as much as 6 billion
($2.6 billion) reais from a share
sale in april, in a deal that will
test the limits of a market that
has been battered in the first
months of the year.
the phone company needs
to raise up to 14.1 billion
reais in capital for a merger
with Portugal telecom to
proceed, of which much will
be subscribed by the existing
european shareholders,
and an investment vehicle
administered by BtG Pactual.
the public equity portion is set
to be latin america's largest
share offering since Brazilian
insurer BB Seguridade listed in
april 2013.
oi's deal was being prepared
as tone in the equity markets
soured, and several issuers
pulled transactions in the
first six weeks of the year.
Better economic conditions
in the US are taking the luster
off investments in emerging
economies. that slow-burning
cyclical turn combined
in January and february
with a rush of nerve-jarring
developments in emerging
markets, including a surprise
devaluation of the argentine
peso and violent protests in
Venezuela and the Ukraine.
the effect was for investors
to yank money out of emerging
market equity funds in volumes
not seen in more than two
years, a phenomenon that is
making share sales tough.
oi is confronting the

Source: M&E

was looking for funds to help pay
back a $342.9 million bridge loan
which it had used last year to
acquire the 50% of office Depot
it did not own. it refinanced with
long term debt instead. LF
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