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
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
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
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
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.