LatinFinance - January/February 2013 - 58

transactions. These companies will need
to watch the market to evaluate their best
liabilities structure.
“Banks have to be much more
conscious today of risk-weighted assets
and returns on those assets,” Espinosa
says. “And as a result, there’s a tighter
focus on tenor, on risk, and that trend
will continue as more and more banks
continue implementing Basel III
standards for their balance sheets.”
Banks will still do lower-rated
transactions but they will be fewer in
number so they can be consistent with
Basel III capital ratios. There will be less
a tendency to load up balance sheets with
lower-rated deals. LF
____________________________________

Best Equity House
Bank of America Merrill Lynch

year for Latin America,” says Facundo
Vazquez, head of LatAm ECM at BAML.
He says that while overall volume is way
down, the ex-Brazil focus is greater than
ever before. “It works for the right names
with the right profile, at the right price,”
he says.

“Brazil works for the right
companies, and they are
achieving very solid
	valuations”
	 Facundo Vazquez,
	 Bank of America Merrill Lynch

____________________________________

R

ecent years have been challenging for
new equity issuance and 2012 was no
exception: volumes and the number of
transactions hit a trough while Brazilian
markets all but ground to a halt.
The upside is that a diminished
focus on Brazilian issuance has meant a
more intense interest in Mexico, Peru,
Colombia and Chile. Even Brazilian banks
are pushing hard to get in on the AndeanMexican act.
Several banks are poised to benefit
from the emergence of the ex-Brazil
markets, having laid the groundwork in
recent years. Bank of America Merrill
Lynch stands out among the elite group of
ECM firms with a pan-regional operation,
working on several of the largest and
most groundbreaking transactions (and
generally earning a high fee on the deals).
This is not to say that opening up
markets outside Brazil has been easy.
Market capitalizations and eligible issuers
are still a fraction of what they are in
Brazil – which may yet see a rebound in
2013.
While investors want geographic
diversity, for BAML and many other
bankers, the quality of the issuer is the
most important question.
“This has been an unprecedented

58 LatinFinance

DOTY stories-Final.indd 58

Last year was one for strong issuers.
BAML was one of four global coordinators
on the groundbreaking IPO for Santander
Mexico in September. The 52.81 billion
peso ($4.11 billion) deal is the biggest in
the region and Mexico’s largest ever offer.
The shares had traded up 21.5% as
of December 1, and may do much to
open up the market for further Mexican
issuance. In the months following the
deal, transactions from Mexichem, Pinfra
and others followed, including some in
the new Fibra real estate fund asset class.
In Chile, BAML helped put together
another piece of Santander’s regional
fundraising puzzle. Santander Chile
attracted more than two times demand
for a $949 million-equivalent allsecondary follow-on. About 70% of
the buyers were international – this is
much higher than the one-third foreign
participation normally seen in such
Chilean deals.
Strong international reception also
drove Chile’s largest-ever IPO in July,
when Inversiones La Construcción raised
$469 million-equivalent. Explaining
the makeup of the complicated holdco
for various investments of the Cámara
Chilena de la Construcción was not an
easy task. ILC owns health insurance

firms including AFP Habitat and Consalud
and also the Tabancura and Avansalud
clinics.
In the end demand reached about
2.5 times, with international buyers
accounting for 35%. Proceeds from
the sale, managed by BAML, IMTrust
and JPMorgan, funds the health
care operations and also be used for
expansion.
Bancolombia opened the market in
January, raising more than $900 millionequivalent through international and
domestic tranches of a follow-on sale.
BAML led the deal with UBS, JPMorgan
and Bancolombia.
The only major market BAML missed
was Peru, which offered only the
Pacasmayo follow-on during the awards
period. All signs point to increased
activity in Peru in 2013, particularly
after a successful IPO of Intercorp’s retail
operations in October.
This was not Brazil’s year in ECM, but
BAML was present on some the country’s
most successful operations, though the
BTG Pactual IPO was the bank’s one
noticeable absence in the region.
Its work in Brazil included the 1.76
billion real ($876 million) follow-on deal
for Taesa. The transmission company’s
“re-IPO” received close to five times
demand, drawing investors with high
dividend yields and convincing them to
ignore the illiquid shares’ trading levels
and pay within the pre-set price range.
BAML managed the deal with BTG, Banco
do Brasil, Goldman Sachs and Santander.
“For brand names and established
companies issuing in size from Brazil
there is a lot of demand,” Vazquez says.
“Brazil works for the right companies, and
they are achieving very solid valuations.”
Follow-ons including Fibria and
Qualicorp also performed well in what
was otherwise a difficult year.
Vazquez and other ECM bankers are
hopeful for a pickup in volume in 2013.
Sticking to top-quality well known names
offering liquidity will be the key. This may
seem like an obvious strategy, but it has
eluded Brazilian issuers in the last few
years as foreign investors
have stayed away.
Shifting perceptions of valuations –
the decline in the Bovespa and the greater

January/February 2013

1/9/13 4:26 PM
LatinFinance - January/February 2013

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