Latin Finance - January/February 2010 - 24

JPMorgan’s DCM volume of $9.5 billion in the year to December 2 put it second in the league table, according to Dealogic, up from $1.6 billion in 2008, when it was tenth. It placed first by revenue, with $46.4 million, a 14.8% wallet share. Holistic Financing Turning Points Through the year, JPMorgan managed many breakthrough debt transactions. With HSBC, JPMorgan led longstanding relationship Codelco’s $600 million 2019 bonds, the issuer’s largest-ever, to reopen the cross-border markets for quasisovereigns in January. In July, new issuance of $1.5 billion from Ecopetrol (joint books with Barclays) and $500 million from Empresas Públicas de Medellín (with Bank of America-Merrill Lynch) revived Colombian non-sovereign issuance after a two-year hiatus. In October, JPMorgan and Citi led Banco do Brasil in the region’s first perpetual in more than a year, a $1.5 billion non-call 11 that drew $13 billion in demand. In the sovereign space, JPMorgan stretched the curve beyond the 10-years that characterized the early part of 2009, with a $1 billion 2025 liability management trade for Peru in July, co-managed with UBS. Brazil followed, pushing a $750 million reopening of its 2037 notes, in a transaction managed by JPMorgan and Deutsche. In September, Mexico would issue $750 million in new 2040 notes, via JPMorgan and Barclays. A return to high-yield – the second half saw a rapid tightening in price, and riskier trades come out of the woodwork – poses a challenge. Despite joint books on a March bond from Caribbean telecom Digicel and an April issue from Brazil’s JBS – both with a strong marketing orientation to US high-yield accounts – JPMorgan was rarely seen on the high-yield issuance in the second half of the year once junk returned in earnest. “Our strategy is to participate in both types of credit [high-grade and highyield], but with a selective approach in terms of the quality of the company and the prospects of the company going forward,” says D’Avola. While JPMorgan ranked fourth in the region’s equity volume league tables in early December, trailing BTG Pactual, Credit Suisse and Santander, a leading role in a handful of key trades both in and outside Brazil made it shine. D’Avola, the only JPMorgan banker in charge of both equity and debt for a region, notes a multi-year strategy to bolster all products in equity. The shop has made strides with research, led by Ben Laidler, head of equity strategy for LatAm. JPMorgan was named were Citi, BBVA and Santander, all part of Cemex’s leading group of lenders. Bright Future Mexico may surprise, says Aguzin top 2009 LatAm equity research shop by Institutional Investor. The origination effort stood out in particular in two instances. On the IPO for VisaNet, which is now called Cielo, JPMorgan was the only bank that did not own a stake in the payments processor to secure a lead bookrunning role. An existing relationship with Visa helped, admits D’Avola, who notes his US counterparts helped bring Visa’s US IPO the previous year. The second seal of approval came when Cemex tapped the equity markets in the wake of its $15 billion restructuring. Again, JPMorgan was asked to joint-lead the deal as the only bank that did not inherit a role in the deal because of its lending relationship. The other joint leads In 2010, investors and bankers alike expect IPO and follow-on activity to continue at a similar pace as the final months of 2009. A clear preference for large, liquid equity deals is likely to favor JPMorgan. Competition, however will become stiffer as others step up pursuit of mandates. “I see a fairly active market in both bonds and equity,” says Aguzin, who also expects a lift in M&A volume. “While it won’t be the equity frenzy of 2007, there will be significant companies accessing the market with sizeable offerings,” he adds. In particular, the client base is expected to grow, from the top 200 to a top 300-400, as investors continue to hunt yield and need to go down market to get it. “More mediumsized companies will have access to the market in 2010,” says Aguzin. While D’Avola sees the rest of LatAm lagging Brazil in terms of volume and number of deals in 2010, there is value in continuing to be regional. “[Non-Brazil equity deals] are going to catch up because investors also care about taking exposure outside Brazil,” says D’Avola. Meanwhile, Aguzin says JPMorgan will continue to be selective with balance sheet deployment, using it only where the terms are “reasonable” and use of proceeds is sensible. “We will look to support our clients with capital, or with services,” says the banker. He adds that domestic capital markets will also be important, and JPMorgan hopes to participate more in them. “It should be a more important market, as companies, pension funds and mutual funds develop more,” says the banker. But there could be turbulence ahead. “We may see volatility going forward, anyone buying into high yield right now knows that there’s a change of ups and downs going forward,” says Aguzin. “It’s too early to call it a bubble right now when spreads are still fairly reasonable when looking at an historical average,” he adds. And markets that everyone is down on could go the other way. “By contrast, I think countries like Mexico may surprise on the upside,” says Aguzin. LF 24 LatinFinance January/February 2010

Latin Finance - January/February 2010

Table of Contents for the Digital Edition of Latin Finance - January/February 2010