LatinFinance - January/February 2013 - 50

increase that stake by 3% in 2015.
The government assumed a 48% share
of the debt and agreed to extend the
payment date of other outstanding debt
held by Parapat until 2028. The deal was
finally approved in April. Bank of America
Merrill Lynch advised Telefónica Móviles,
and Corficolombiana advised Coltel.
The new Coltel is now the secondlargest integrated operator in the country.
It has achieved synergies of scale, greater
flexibility, as well as offer bundled
services. Its new strategy is to increase
mobile broadband and value added
services along with pay-TV services and
fixed line broadband access. It plans to
undertake a $2.5 billion-equivalent capex
programme.
The merger had a successful epilogue
in September. Coltel sold a $750 million,
10-year bond in the international
markets. Despite the difficulty of
explaining the recent tie-up and the
resulting structure, the transaction
attracted $8 billion of orders. So
successful was the issue that the bonds
tightened in from price talk of a yield of
6% at the roadshow to a final price of
5.375% and issued at par. Credit Suisse,
HSBC and JPMorgan managed the BB
rated sale. LF

was the first covered bond anywhere in
the emerging markets beyond Korea.
“It’s more than a covered bond,” says
Carlos Mendoza, co-head of LatAm DCM
at Deutsche Bank, which managed the
sale with HSBC. “It was a solution for the
client. Without it, Global Bank couldn’t
raise $200 million.”
Global initially pitched investors
in May but waited until better market
conditions in September, after adding a
second bookrunner.
“A lot of countries in Europe have
special covered bond regulations, and we
don’t have that in Latin America,” says
Jorge Vallarino, senior vice president of

“Panama has all of the
	 legal tools in place to do
the structure”
	 Jorge Vallarino, Global Bank

finance at Global Bank. “But Panama has
all of the legal tools in place to do the
____________________________________ structure.”
The 2017 transaction had a Baa3/
BBB minus rating, above Global’s Ba1/
BB+ senior rating, and below the ratings
of covered bonds in the US, most of
which are AAA. Nevertheless, the bank
Global Bank $200m 4.750% 2017
generated $500 million of orders from 70
Covered Bond
accounts.
____________________________________
The notes, backed by a cover pool
of Panamanian residential mortgages
Investors with active imaginations have denominated in dollars, priced at 98.906
long wondered when covered bonds
with a 4.75% coupon to yield 5.0%. The
would be used in Latin America. Several
nearly 4,000 mortgages were primarily
countries in the region have had active
sourced from low and middle-income
mortgage markets, some even tied to
Panamanians, with an aggregate principal
dollars, with mortgage-backed bonds and balance of $241 million and average
for many years had been thought of as
principal balance of $61,450, according
ripe for a covered issuance.
to Standard & Poor’s. It includes a
Bringing the first deal was not easy,
two-month reserve account to cover any
and in the end the pioneer was not one
potential interest shortfalls.
of the region’s giants, or even the largest
Covered bonds give investors a
lender in its own country. But Panama’s
preferential claim in the event of a default,
Global Bank has laid the framework for
allowing issuers to get a tighter pricing
others to follow, and its $200 million sale versus senior unsecured debt.

Structured
Financing

I

50 LatinFinance

DOTY stories-Final.indd 50

He says the issuer had previously
relied on domestic debt funding. Vallarino
says about 75% of participation came
from the US, and the remainder from
Europe and Latin America. About 70% of
the buyers were fund managers.
“Most of these buyers had never
bought a covered bond before,” Vallarino
says, noting that many of the European
investors that understood the asset class
were unavailable to participate due to the
crisis in Europe.
While difficult to find comparables,
the deal offered investors an attractive
pickup to the Panama sovereign. A more
liquid size might have encouraged more
investors to participate, but the issuer
opted for a smaller size to achieve the
desired pricing – ideally aiming it to
perform well in the secondary and set the
tone for future issuance in the asset class.
The bank also needed to have enough
mortgages to back a deal.
“It makes sense for Panama to be the
first,” Mendoza says, given the dollarized
economy and developed banking sector.
He says lenders in other countries –
Brazil, Mexico and Chile – are interested
in bringing new deals. Mid-sized banks
such as Global are likely to be the first
to open the sector, with larger lenders
waiting until the market develops. LF
____________________________________

Syndicated Loan
Ternium $700m 5-year Loan

____________________________________

S

teelmaker Ternium’s purchase of $2.7
billion of shares in Brazil’s Usinas
Siderúrgicas de Minas Gerais (Usiminas)
was nothing if not challenging: it called
for funding to be put together in a volatile
climate for a borrower in Luxembourg, a
parent in Argentina and a target in Brazil.
Ternium Investments and its affiliates
agreed in November to pay $2.2 billion for
27.7% of Usiminas’ ordinary shares, with
the Ternium unit putting in $1.5 billion
in cash. The price was a hefty premium
to enter Brazil. The loan was executed
through Ternium Investments’ subsidiary
Ternium Investment Sàrl.
The $700 million five-year amortizing
senior unsecured loan had to be put

January/February 2013

1/9/13 12:10 PM
LatinFinance - January/February 2013

Table of Contents for the Digital Edition of LatinFinance - January/February 2013
