Foreigners, with regional integration in their sights, staked out positions in Chile¹s investment banking market in 2012. This is likely to shake up the domestic competition, especially with the welcome the country¹s debt and equity issuers have received internationally. Despite the backdrop, the longstanding international partnership of Banchile-Citi, stands out as the most balanced provider of investment banking services.
Chile has seen a relatively high level of equity issuance over the awards judging period, particularly when compared to other markets. Andrés Bucher, managing director at Banchile-Citi, says that total ECM activity in 2012 will be $5 billion, lower than 2011¹s $7.2 billion, but still much higher than the $1.5 billion-$2 billion levels seen in prior years. Banchile has worked on several large offerings during the period, including follow-on transactions for Sigdo Koppers, Quiñenco, Aguas Andinas and Essbio and Essval.
The local bond market, however, has proceeded in spurts, but mostly in line with the historical average.
Bucher says the $3 billion expected in Chile¹s local DCM is in line with averages in recent years. Banchile-Citi led deals for clients including Inversiones Southwater, Quiñenco and Agrosuper, giving it a league table topping $960 million-equivalent volume during the awards period.
A November 2011 sale for Movistar featured a $66 billion peso tranche that Banchile says is the largest-ever corporate placement of debt denominated in pesos. Local investors are still conservative, a fact that limits the range of potential issuers, with lower-rated borrowers having access to the local bank loan market.
³The local bond market has advantages for local companies,² Bucher says. ³Local issuers can always rely on it when the international market closes.²
However, Chilean companies typically enjoy good access to international investment, with this year¹s cross-border issuance to date already surpassing last year¹s $6 billion total.
Lower rates should attract more issuers. Higher-yielding Chilean names are increasingly welcome, as long as they issue dollar-denominated debt. Also of note is Chile¹s emergence as an exporter of capital, with a Santiago stop becoming customary on LatAm DCM and ECM issuers¹ roadshows.
³Maybe trading in the MILA platform [the Andean stock exchange] is relatively small, but the concept of the MILA is one that is here to stay,² Bucher says. Though not the region¹s largest market, Chile should continue to attract M&A interest thanks to the perceived quality of the economy and strong credit rating, Buchers says. Strategic and sovereign wealth funds are likely to play a role.
Banchile-Citi advised Morgan Stanley Infrastructure Partners on the sale of 50% of the Inversiones Saesa utility to Canadian pension fund Alberta Investment Management. The sale fetched $550 million, and came at a multiple of more than 16 times Ebitda.
The bank also advised Spain¹s Enagas on its purchase of 40% in the GNL Quintero liquid natural gas terminal from BG Group. The deal was seen at the time reaching $352 million, depending on certain milestones. Chilean companies will continue to expand throughout the Andes and elsewhere in Latin America. although there remains a shortage of quality assets for sizeable M&A deals, Buchers says. Most of the growth should be organic.
In the last six months, local investment banks IMTrust and Celfin have been taken over by foreign investment banks expanding in the region. The key is offering a broad selection of products.
³This is becoming regional. Chile is a very competitive environment, and will become more competitive with the entrance of regional investment banks,² Bucher says. LF