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Colombia Best Investment Bank: Bancolombia

Nov 1, 2012

The race for space in Colombia¹s banking sector has been running for some time. In addition to the retail transactions that make headlines, foreign interest has boosted investment banking operations. In theory, this will benefit all bank players but, for the moment, Bancolombia¹s unmatched scale across product areas gives it a substantial lead over its competition.

The follow-up business to Grupo Sura¹s $3.8 billion purchase of ING¹s pension assets offers a strong example for Bancolombia¹s case.

³For the Suramericana transaction, the largest that a Colombian company has ever done, we were a one-stop shop for them,² says Jean Pierre Serani, vice president for origination at Bancolombia¹s investment banking arm.

³We provided credit, we provided M&A, and we provided the equity capital market access.² Bancolombia, headed by Carlos Raúl Yepes, undertook evaluations of indicative and binding offers, and helped arrange lines of credit for $1.1 billion credit with three local banks. The process, culminating in a public equity sale, took three months, Serani says.

³More Colombian blue chips are looking to expand abroad,² he says. ³Also, there is going to be more local consolidation and global private equity shops coming for acquisitions given the growing consumer base and strong internal demand.² Inbound M&A, seen most heavily in 2012 in the financial sector, looks set to continue. There is intense international interest in Colombian assets and plenty of scope for consolidation. Serani expects M&A focus will be in the middle market of $30 million-$150 million next year.

The $1.8 billion-equivalent equity follow-on to raise funds for Sura¹s purchase was done during a tricky patch in the international markets, and raised less from public investors than had been aimed for. That said, it was still what the issuer described as Colombia¹s largest-ever equity raising by a non-government entity. Bancolombia also raised $900 million-equivalent for itself in the international and domestic equity market during the awards period.

³Equity issuance has been a little more quiet his year,² Serani says. ³The market is still digesting what they acquired last year. Also, the effects of the crisis in Europe have made portfolio managers more conservative. Next year we will probably see more activity.² Bancolombia led the domestic DCM and ECM league tables with dollar equivalent figures of $927 million for DCM and $2.05 billion for ECM.

Among the most compelling growth areas is infrastructure finance and in particular its implications for Colombia¹s fixed income market. The country¹s growth has left its roads below regional standards ­ something a $25 billion government program aims to address.

However, Serani says funding it will be well beyond the capacity of the local bank market, the traditional source of project finance. Domestic bonds backed by government payment certificates ­ as have been done in Peru ­ should be the way forward.

³This is going to trigger the development of the project bond market, but we need to do short-term financings from the banks to take care of the money needed for construction,² Serani says. LF

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