Latin American capital markets saw the largest deal flows and market developments on record in 2017, largely supported by a global economic recovery, a weakening dollar (which peaked at the start of the year), strengthening EM currencies, and rising commodity prices. Following a robust selection process which involved an industry-wide vote, and our evaluating over 300 deals on criteria focused on structural innovation, size, quality of execution, pricing, timing, scarcity value and contribution to opening up new markets, 17 issuers along with their advisers listed below are the inaugural winners of the Bonds & Loans Latin America Awards for Deals of the Year.
Over the past 12 months, sustained improvement in fundamentals was met with a stabilizing, though at times tenuous, political environment – with the likes of Brazilian President Michel Temer and Argentine incumbent Mauricio Macri holding off calls for resignations, a softening of rhetoric in the US and progress on NAFTA negotiations. Uncertainty surrounding the upcoming election cycle in 2018 also helped catalyse a wave of new issuance from across the region.
Market conditions were so favourable in fact, that deal flow out of Latin America was hardly interrupted throughout the year, despite persisting corruption scandals and rising global geopolitical tensions, with both local currency issuance on the rise amid improving FX rates and multiple corporates returning to market to refinance debt and stretch out tenors under better terms. That said, the sheer volume of successful and impressive transactions over the past 12 months made the task of picking just the nominees for Bonds & Loans’ Deals of the Year Awards difficult enough.
Top Trends
Liability management amid more favourable rates and a global hunt for yield was a dominant strategy this year. Sovereigns, as is the convention, led the way with some bold issuances, including the first century bond in emerging markets, and the first sovereign Euroclearable local-currency bond in Latin America.
Scarcity value became a significant pricing driver, allowing for a wider spectrum of issuers to debut or return to market after a long break. High-yield issues that investors would have sniffed at in previous years were snapped up almost as quickly as investment grade notes, providing a convenient opportunity for capital holders to diversify their risk profile and gain exposure in new geographies.
The year also saw some highly sophisticated, exquisitely tailored project and structured financing schemes emerge, signalling the long-touted arrival of complex instruments that ought to help find and secure funding for the large-scale infrastructure, transport and housing development programmes under way across the region. Many of these were carefully put together by major Western banks with the specific aim of shifting much of the risk on to the private sector – a key development that should keep the sovereign balance sheets out of the red, especially those that are working to de-dollarise their economies.
Looking ahead, a booming American economy and the cheap dollar could tilt the Fed more to the hawkish side, meaning that 2018 might not be such an easy ride for emerging market economies. With a number of key elections coming up in the region (some increasingly hard to predict), Venezuela’s economy teetering on the edge, stock market jitters and the unpredictability of the Trump administration, the emerging market rally that buoyed Latin American debt capital markets could peter out; then again, it may not.
The region’s fundamentals are strong. Growth has been recovering, and local politics – though still difficult to predict at times – is normalising. With European central banks’ unwinding and Fed hikes unlikely to be rapid – and certain to be signalled well in advance – the outlook for South American economies is as bright as it has ever been.
As we reflect on the deals that voters selected as winners of Bonds & Loans Deals of the Year Awards 2018, we hope to inspire the next wave of innovative transactions and encourage borrowers to challenge themselves and their treasury teams to go bigger and be bolder. Congratulations to all the winners of our inaugural Latin America Deals of the Year Awards.
WINNERS
Sovereign Debt Deal of the Year
Issuer / Borrower: Republic of Argentina
Deal Type: Senior Unsecured Bond
Deal Size: USD2.75bn
Issue Date: June 2017
Tenor: 100 years
Joint Lead Managers/ Joint Lead Managers: Citi, HSBC; Nomura, Santander,
Advisers: Cleary Gottlieb Steen & Hamilton; Shearman & Sterling
A hundred years of solitude is not a bad thing if it means you are the only Latin sovereign to successfully place a century bond, the largest on record. That is exactly what Argentina did in June this year, pricing a landmark USD2.75bn deal at 7.125%, with a hefty 3.7x oversubscription. The deal, which saw the yields tighten 35bp from IPTs, marked a record tenor for a sub-investment grade entity and saw the sovereign establish its yield curve across currencies – with transactions in USD, EUR and CHF – and tenors, with maturities between 3 and 20 years from pricing. Solid distribution – mostly to accounts in North America and Europe – and a diversified group of investors, including fund managers, hedge funds and banks, showed a lot of hunger for Argentinian credit and laid the path for more Argentinian issuers to tap the markets in 2018.
Quasi-Sovereign Debt Deal of the Year
Issuer / Borrower: Pemex
Deal Type: Multi-tranche Bond
Deal Size: USD5.5bn
Issue Date: December 2016
Tenor: 5-10 years
Bookrunners: Bank of America Merrill Lynch, Citi, JPMorgan, Mizuho, Morgan Stanley
Advisers: Cleary Gottlieb Steen & Hamilton; Ritch, Mueller, Heather y Nicolau / Shearman & Sterling
A regular issuer over many years, in 2017 Pemex once again took an early lead with a massive USD5.5bn triple-tranche transaction that included fixed and floating rate instruments, a first in LatAm since 2014, and drew a mammoth USD30bn orderbook, allowing for a 40-45bp tightening from IPTs across all tranches. The issuance also carried a symbolic significance, being the first capital markets deal from Latin America and Mexico, and the second in EM following the US Presidential election, successfully weathering the market volatility brought about by Trump’s win. Finding the window of opportunity following a sudden recovery in oil price and a series of successful oil field auctions by Mexico led Pemex to tap the market early, and pre-fund much of its 2017 external financing.
Investment Grade Corporate Bond Deal of the Year
Issuer / Borrower: Braskem
Deal Type: Dual Tranche Bond
Deal Size: USD1.75bn
Issue Date: October 2017
Tenor: 6 years, 11 years
Bookrunners: BNP Paribas, Credit Agricole, Itau, Morgan Stanley, Santander, SMBC Nikko, UBS
Advisers: Lobo de Rizzo, White & Case; Milbank Tweed Hadley & McCloy, Pinheiro Neto
After a 3.5-year absence from the capital markets, petrochemicals giant Braskem came back with a bang, placing a USD1.75bn dual-tranche bond at a volatile time, just as the company settled lawsuits with Brazilian, US and Swiss authorities. Investors were overwhelmingly pacified by Braskem’s commitment to the internationalization of its business, evident from the 47% of 2016 revenues generated by exports and international sales. The 10-year tranche priced 4bp inside the T+235 achieved by the sovereign just a day earlier and had a negative new issue concession of 2bp – a particularly impressive feat. At USD1.75bn, the issue was oversubscribed 8x and became the second largest international bond from a Brazilian non-state corporate ever.
Bond Deal of the Year by a Debut Issuer
Issuer / Borrower: Fenix Power Peru
Deal Type: Senior Bond
Deal Size: USD340mn
Issue Date: August 2017
Tenor: 10 years
Bookrunners: Citi, Scotiabank, SMBC Nikko
Advisers: Cleary Gottlieb Steen & Hamilton; Milbank Tweed Hadley & McCloy
Prior to the transaction, Fenix Power Peru was able to secure three investment grade ratings on the back of implicit support from Chilean utility Colbún, and owing to the structural enhancements, including an amortizing profile and debt service reserve account. With 4x oversubscription, it was an impressive debut that priced inside PetroPeru’s notes and achieved investment grade despite the issuer’s 7x initial leverage. The Singapore listing and a nearly perfectly balanced orderbook were reflective of exceptional diversification and strong institutional participation from investors across the globe.
Infrastructure Finance Deal of the Year
Issuer / Borrower: Blackrock/ Lazaro Cardenas Port Logistics Project
Deal Type: Project Finance Facility
Deal Size: USD347mn
Issue Date: August 2017
Tenor: 2-15 years
Mandated Lead Arrangers: Citi
Advisers: Milbank, Tweed, Hadley & McCloy, Ritch, Mueller, Heather y Nicolau; Paul Hastings, Nader, Hayaux y Goebel
In one of the most elegantly tailored transactions of the year, Blackrock and Citi Bank conjured up a bespoke dual-tranche bond and loan hybrid to finance the Lazaro Cardenas port project. To finance two parallel greenfield and brownfield phases, the arrangers and agents created a fully integrated solution, with a hybrid dual-tranche facility featuring a short-term fully amortizing Term Loan, alongside a long-tenor Private Placement. This bold innovative approach allowed the issuer to monetize the full tenor of the underlying offtaker contract, while eliminating refinancing risk and locking in equity returns early, with an added bonus of achieving an investment grade rating. Notably, the hybrid marked first ever placement of a 4(a)(2) project bond in Latin America and saw the tightest spread for a CFE-related project financing.
Power Finance Deal of the Year
Issuer / Borrower: Greenwind S.A.; El Corti Wind Farm
Deal Type: Syndicated A/B Loan
Deal Size: USD104mn
Issue Date: September 2017
Tenor: 9 years
Sponsors/ Mandated Lead Arrangers / Lenders: Pampa Energía, Castlelake; IDB Invest; ICBC, Santander
Advisers: Salaverri, Dellatorre, Burgio & Wetzler Malbran; Winston & Strawn; Clifford Chance; Bruchou, Fernandez Madero & Lombardi
As Argentina, Latin America’s third largest power market, continues to diversify its energy sources, Greenwind S.A. – a joint venture between Pampa Energia and Castlelake L.P. – blazed a trail with a senior corporate syndicated loan to finance the new El Corti wind farm. The deal, which marked the first cross-border financing under the new RenovAr programme (a policy that will bring the share of renewables in the country’s energy mix to 20%), saw two loan tranches worth USD104mn, syndicated within a A/B framework. With a corporate guarantee from Pampa Energia, the deal saw unprecedented 9-year tenors, marking a new chapter in financing of infrastructure projects in Argentina and demonstrating the feasibility and investor appeal of projects linked to the RenovAr programme.
Project Finance Deal of the Year
Issuer / Borrower: Invenergy - Campo Palomas
Deal Type: A/B Bond Financing
Deal Size: USD150.9mn
Issue Date: July 2017
Tenor: 19.5 years
Placement Agent / Lender of Record: DNB Markets, Inc.; IDB Invest
Advisers: White & Case / Hughes & Hughes; Clifford Chance / Ferrere Abogados; Mayer Brown / Appleby
Issues out of Uruguay are precious and hard-to-come-by, which makes this sophisticated financing structure for the Campo Palomas wind project particularly impressive. With an innovative A/B bond structure under the IIC’s umbrella, a stunning 20-year tenor, and a green certification to boot, this investment grade project bond opened new doors for the renewable energy market in Uruguay, where a fifth of energy produced comes from sustainable sources.
Structured Bond Deal of the Year
Issuer / Borrower: Mexico City New Airport
Deal Type: Dual Tranche Green Bond
Deal Size: USD4bn
Issue Date: September 2017
Tenor: 10 years, 30 years
Bookrunners: Citi, HSBC, JPMorgan
Advisers: Cleary Gottlieb Steen & Hamilton / Jones Day; Galicia / Paul Hastings
A sizeable deal to finalize the financing for the construction of the port of entry to the largest metropolis in Western hemisphere arrived amid a favourable macro backdrop, with resilient global growth and a soothing monetary policy outlook allowing the issuer to price the largest corporate green bond to date. It broke a number of other records, including largest green bond from a Latin American issuer, largest USD airport bond, and largest 30-year corporate individual tranche bond in the region and emerging markets more broadly, on par with Pemex’s 30-year issue. Pricing with a negative new issue concession of -5bp, the 2028 and 2047 notes saw healthy distribution across multiple geographies (including Asia) and types, with the bulk snapped up by fund managers, and around 18% of each going to insurance and pension funds.
Natural Resources Finance Deal of the Year
Issuer / Borrower: Renova
Deal Type: Syndicated A/B Loan
Deal Size: USD410mn
Issue Date: May 2017
Tenor: 6 years, 9 years
Mandated Lead Arrangers/ Lead Arrangers / Deal Managers: IFC, Rabobank; BID Invest, FMO, ING, Santander, Natixis; ICBC, ABN Amro, Itau BBA
Advisers: Curtis, Mallet-Prevost, Colt & Mosle; Becker, Glynn, Muffly, Chassin & Hosinski / Marval, O'Farrell, Mairal
With IFC and Rabobank as mandated lead arrangers, Renova executed an excellent multi-tranche syndication, which allowed it to secure funding for capacity expansion at some of the longest tenors seen in Argentina to date. A two-step syndication with IFC and IIC anchoring the financing as lenders of record under twin A/B Loans, involved securing preliminary funding from DFIs for the longest tranche, followed by commitments from commercial lenders solicited during the market sounding. This was a standout transaction that helped carve a path for borrowers in Argentina’s agricultural sector and the wider market.
Structured Finance Deal of the Year
Issuer / Borrower: Lima Metro Line 1
Deal Type: Dual-Tranche Structured Project Finance Loan
Deal Size: USD396mn
Issue Date: August 2017
Tenor: 3 years, 17 years
Sponsors / Mandated Lead Arrangers: Graña y Montero, Ferrovias Participaciones; Mizuho, SMBC
Sole Structuring Bank, Sole Bookrunner, Sole Underwriter: Mizuho
Advisers: Paul Hastings / Philippi Prietocarrizosa Ferrero Du & Uria; Clifford Chance / Rodrigo Elias & Medrano
The USD396mn financing package for the expansion of Lima’s first metro line consisted of a 3-year USD80mn working capital facility and a 17-year USD316mn term loan, which was provided to a Delaware-based SPV that could purchase CPAOs from the concessionaire without recourse, and is eventually going to be refinanced on the capital markets via structured bonds. The unique structural solution, implemented for the first time on a Peruvian project with government certificates, mitigated construction and operation risk for the term loan lenders, while the working capital facility eliminated concessionaire’s and sponsors’ risk. A tailor-made internal derivative that allowed for structuring a fixed-rate loan with bond-refinancing option was the icing on the cake for this award-winning deal.
Local Currency Bond Deal of the Year
Issuer / Borrower: Republic of Chile
Deal Type: Euroclearable Local Currency Bond
Deal Size: CLP1tn
Issue Date: January 2017
Tenor: 4 years
Bookrunners: BNP Paribas / Citi / Goldman Sachs / JPMorgan
Advisers: Cleary Gottlieb Steen & Hamilton; Shearman & Sterling
Chile affirmed its highest standing among Latin American economies with this inaugural CLP-denominated Euroclearable issuance, which proved so popular among international investors (who comprised 20% of the final book) that it spurred a flurry of sovereign bonds across the region. The deal reaffirmed the Republic’s status as leader of developing local-currency markets in Latin America and opened the path for others, namely Peru, to follow its lead. Going forward, the bond is expected to help drive down cost of funding in the Republic, as well as deepen the domestic CLP market to new pools of liquidity by simplifying to it for offshore investors, and aligning Chile's post-trade processes with international standards.
Financial Institutions Deal of the Year
Issuer / Borrower: Bancolombia
Deal Type: Basel 3 Subordinated Tier 2 Bond
Deal Size: USD750mn
Issue Date: October 2017
Tenor: 10 years
Bookrunners: Bank of America Merrill Lynch, Citi, UBS
Advisers: Sullivan & Cromwell; Cleary, Gottlien Steen & Hamilton, Philippi Prietocarrizosa Ferrero DU & Uria
The country’s first Basel III-compliant instrument was impressively priced, with IPTs originally put at low to mid 5% – but as the orderbook was allowed to “stew” overnight that figure dropped by nearly 63bp to 4.875%, the lowest coupon for any subordinated issue out of Colombia, and for any Basel III-compliant notes out of Latin America. It was also the first intermediate tender offer in Colombia, allowing to minimize the premium on the notes, with additional write-off provisions and a 5-year call option alleviating some of the investors’ concerns.
Transport Finance Deal of the Year
Issuer / Borrower: GLOBALVIA - Autopista del Sol (Ruta 27)
Deal Type: Dual Tranche Dual Currency Bonds
Deal Size: USD350.75mn
Issue Date: May 2017
Tenor: 13 years, 10 years
Bookrunner: Citi
Advisers: BLP, Jones Day; Clifford Chance, Consortium
Globalvia’s dual-currency project bond – Its inaugural issuance on the international and local Costa Rican debt capital markets – achieved a number of ‘firsts’ and enabled it to sustainably increase its debt capacity. With impressive tightening of 62.5bp and nearly 3x oversubscription leading to the issue being upsized to USD300mn, it was the first non-IG project bond from Central America and the largest non-state entity issue out of Costa Rica. Of note also is the NPV-related cash trap mechanism embedded in the deal, which enables it to protect investors and mitigates prepayment risk.
Sub-Investment Grade Corporate Bond Deal of the Year
Issuer / Borrower: Suzano
Deal Type: 144a/RegS Bond
Deal Size: USD300mn
Issue Date: March 2017
Tenor: 30 years
Bookrunners: Bank of America Merrill Lynch, Bradesco, Itau, JPMorgan, Morgan Stanley, Santander
Advisers: Cleary Gottlieb Steen & Hamilton; Clifford Chance
In a landmark transaction for both the paper & pulp industry and Latin America’s DCM, Suzano achieved a hat-trick of goals with a record 30-year tenor for the sector across emerging markets, the first full non-IG 30-year bond in EMs and the first 30-year dollar-bond from Brazil’s corporate sector since 2014. The company braved tough conditions, in the midst of a sell-off in commodities to successfully extend its average debt term (from 3.5 to 5 years) and prepare itself for eventual adverse cycle in the paper and pulp industry. The bonds priced only 30bp wider than the 10-year benchmark notes issued in August 2016 (pricing similar to some IG debt) and saw strong demand from international investors, with nearly a third of the notes placed with European accounts.
Liability Management Deal of the Year
Issuer / Borrower: Republic of Peru
Deal Type: Euroclearable Local Currency Bond
Deal Size: PEN10bn
Issue Date: August 2017
Tenor: 15 years
Bookrunners: Bank of America Merrill Lynch, BNP Paribas, HSBC, Scotiabank
Advisers: Lazo de Romaña, Simpson Thacher & Barlett; Garrigues, Shearman & Sterling
Following in Chile’s footsteps, Peru launched its debut Euroclearable issue as part of a liability management programme to reduce FX exposure, extend the duration of its debt and lower servicing costs. With no new-issue premium and pricing only 200bp above Peru’s USD curve, the deal represented the largest single PEN-denominated tranche, attracted strong interest from investors in the US, UK, Europe and Peru and performed well on the secondary markets, tightening to 5.58% in the following months. One of the largest EM local-currency transactions in history, this was notably the first deal by the sovereign to not include a bond-market LM component.
Syndicated Loan Deal of the Year
Issuer / Borrower: Cemex
Deal Type: 5 Tranche Term Loans and Revolving Facility
Deal Size: USD4.05bn
Issue Date: July 2017
Tenor: 5 years
Bookrunners: Bank of America Merrill Lync, Banorte, BBVA Bancomer, BNP Paribas, Citi, Credit Agricole, HSBC, ING, JPMorgan, Mizuho, Santander
Advisers: Slaughter and May; Clifford Chance, Galicia
In a deal that perfectly encapsulates the cement maker’s recent push to cut debt servicing costs and deleverage, Cemex was able to upsize a USD3.6bn syndication to USD4.05bn, with five tranches in three currencies distributed among 20 banks. The loan, launched to refinance a previous 8-tranche facility, priced at 125-350bp over Libor, had a carefully tailored consolidated leverage and coverage ratios and allowed several major lenders to increase their exposure to CEMEX, bringing the issuer a step closer to reclaiming its investment grade rating.
Syndicated Loan Deal of the Year by a Debut Borrower
Issuer / Borrower: Grupo Industrial Saltillo
Deal Type: Acquisition Financing Facility
Deal Size: USD326.5mn
Issue Date: November 2016
Tenor: 3 years, 5 years
Mandated Lead Arrangers: HSBC, Santander, Scotiabank
Advisers: Santamarina & Steta, Cuatrecasas; White & Case
Grupo Industrial Saltillo’s USD326.5mn senior secured facility to finance the purchase of Spanish auto-manufacturer Infun consisted of a USD276.5mn 5-year term loan and a USD50mn 3-year revolving credit facility, and was fully underwritten by the bookrunners. The purchase opens new doors for the Mexican conglomerate, allowing it to diversify into new products and geographies – notably, the Asian markets. The transaction was oversubscribed, with impressively balanced distribution across the globe, roughly a third each for European, American and Mexican accounts.
Join the Ceremony and meet the winners on the 22th March in Mendoza, Argentina
