Latin Finance - November/December 2009 - 38

2009 that is a leader in its sector says Cavallini. Móvil south to roll out the first huaso Having business in Chile helps, but is not bond, or bond sold on the domestic a requirement, he says, noting Mexican markets by a foreign issuer. América and Brazilian issuers are being targeted. Móvil sold 4 million Unidades de Fomento Prior to Citi’s merger with Banchile ($145m) worth of 3.00% five-year bonds in early 2008, Cavallini and co-head to yield 3.31%, or 141 basis points over the government. The sale drew demand of Andrés Bucher, both career Citi bankers, spent close to two years working with the around 6.4 million UF. local pension fund authority on issues “It went fantastically well,” América regarding local institutions’ ability to Móvil CFO Carlos García Moreno tells invest in foreign credit issued locally. It LatinFinance, noting the price equates to roughly 4.5% in dollars, and was reduced was decided that such a bond would be treated as a foreign investment, which from an initial 3.5% yield target. can account for up to 35% of a pension’s “Now that we are there, it will be portfolio. The bankers also worked with our intention to keep Chile as one of our regulators on financial reporting, and funding options,” García Moreno says. it was deemed that issuers tapping the At the time of issue, the operator of the Claro brand Chile, had no plans to swap, according to treasurer Ricardo Rivera, who notes that in dollar terms the funding is substantially cheaper than international markets. The deal wasn’t large in size, but it represents close to three years of work by the bank with local authorities and investors, and paves the way for more similar trades. “When there’s a crisis, there’s an opportunity,” says Juan Carlos Cavallini, cohead of Banchile Citi’s Opportunity in crisis: Bucher and Cavallini investment bank. He local market could report their statements notes that Chile’s local market remained using the same guidelines as the F-20 open throughout the crisis, and 2009 has filing that non-US issuers place with the been a record year for local corporate SEC, which simplifies paperwork. debt issuance, totaling $4.7 billion equivalent through September, according International Reach to data from Banchile Citi. That is higher Banchile Citi demonstrates the benefits of than the previous record of $3.7 billion working in tandem with an international for the full year in 2008, he notes. “This brings something new to Chilean counterpart. In the first half of 2008, Banchile Citi secured a mandate to investors,” says Cavallini, pointing to the lead local market loan syndication for diversification benefits from a quality energy company Colbun as part of a name. “Now everybody’s working on debt restructuring. The $200 million trying to find new deals like this,” he equivalent six-year revolver, heard priced adds, noting he sees two to three more at TAB plus 150 basis points, was the first huaso bonds coming in the six months in Chile to include participation from through March 2010. insurance companies, claim executives The ideal candidate for this type of on it. The deal laid the foundations deal is an investment grade corporate for a $400 million refinancing of an international loan at Libor plus 235 basis points, which was co-led by Banchile Citi, as well ABN AMRO, BBVA, Itaú and Santander. “International banks felt comfortable in participating [in the refinancing] because the local facility was in place,” says Cavallini. While the deal falls outside this award process’ period of consideration, bankers say it is the type of value they hope to continue providing. In the case of Colbun, however, subsequent local bonds and CP lines for Colbun were led by Celfin and Itaú. Banchile also led a similar syndication and restructuring in the local market for department store retailer Johnson’s, worth $350 million in May 2009. The deal involved restructuring near and long-term maturities and getting 13 banks to migrate $200 million equivalent worth of debt into an eight-year facility. A $110 million 1-year tranche was raised and recently taken out, and a smaller group of banks also put up a $40 million working capital line. In August 2009, Banchile Citi surfaced as the lead advisor to ING in its divestiture of its Chilean annuities and mortgage business to Grupo Vida. Deal terms are not disclosed but people close to the process have suggested it stands at around $350 million. “Sometimes we source the mandates, other times [Citi’s non-Chilean bankers] will source them,” says Bucher, who is in charge of M&A and equities. “We work as a team on transactions,” he adds, noting he expects to close two to three more deals this year. LF UPDATE For daily news of local market transactions, see www.latinfinance.com > 38 LatinFinance November/December 2009

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Latin Finance - November/December 2009

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