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DEALS OF THE YEAR: Best Bond House

Jan 1, 2013

HSBC

Bonds were once again the focus of Latin America's capital markets in 2012, with issuance volumes breaking even the previous year's records. By year-end, there was a growing belief that it would be remembered as the year emerging market debt finally went mainstream - though most notable LatAm credits have arguably been conventional for some time.

Total cross-border bond issuance from the region in 2012 topped $116 billion, reaching $160 billion with local market deals included, according to Dealogic.

HSBC is one of three investment banks, with Citi and JPMorgan, that were at the top of the league tables and can claim a diverse business across geographies, product types, currencies and markets.

But ultimately HSBC stands out not only for the range of its deals currencies, markets and clients - including a presence on most key transactions across the board - but also for having led several of the year's most innovative trades, while also having a formidable pan-regional presence in LatAm's local markets.

In the dollar sector, HSBC had a presence on major trades in the sovereign, quasi-sovereign, and high-grade corporate segments. The bank led or co-led several LatAm firsts: a corporate global depositary note (GDN), an offshore renminbi (Dim Sum) bond, a covered bond, an Australian dollar issue as well a ground-breaking tier 1 perpetual.

"The debt capital markets platform gained a lot of momentum in 2012," says Katia Bouazza, HSBC's co-head of global capital markets for the Americas. "We brought to the market a lot of sophisticated deals. HSBC was able to open markets for issuers so that they could achieve their financing objectives and have access to an extremely liquid US dollar debt market."

The bank's sovereign deals included Mexico's $2 billion 32-year benchmark bond, which allowed the UMS to reach new lows for coupon and yield, as well as provide a long-end benchmark that can be reopened for two more years.

Uruguay's December 2011 23.4 billion peso ($1.28 billion) dollar-to-peso exchange was a masterful sovereign liability management operation and a key milestone in the country's return to investment-grade status.

HSBC also managed Brazil's first real-denominated liability management exercise in several years and another swap for Colombia. The bank also led deals for all three LatAm-based supranational banks.

The bank led a 10 and 30-year transaction for Corporación Nacional del Cobre de Chile (Codelco), its fifth consecutive transaction for the issuer. The transaction represented Codelco's largest-ever issue and the lowest yield and coupon to date by a non-sovereign Latin America issuer for both bonds.

Other deals for the region's high-grade borrowers include Petrobras in euros and sterling, Vale, and América Móvil. A $1.15 billion 10 and 30-year sale from Mexichem drew 17 times demand in the split-rated space.

"Our global platform allows us to combine local expertise with global knowledge which gives us the vision to identify opportunities others might not and drive product innovation," says Gerardo Mato, chief executive of global banking for the Americas.

HSBC worked on some of the biggest high-yield trades, including those for OGX and Colombia Telecomunicaciones. However, this is one area where it has done less business than the other banks at the top of the overall league tables and is perhaps the only hole in its armour.

Mato says the bank has started to build its client base to cater better for frequent issuers and also accommodate a growing number of high-yield names.

HSBC most stood out in innovative trades in both the dollar market and in diverse currencies. The bank was among those chosen for Pemex's GDN offering, the first corporate transaction that emulates terms of a particular Mexican local currency-denominated bond and trades, settles and pays in US dollars. It was the second Latin American GDN issuer after Peru, in a deal that created a new funding alternative for the region's corporate borrowers.

Panama's Global Bank promoted HSBC from co-manager to joint bookrunner in its second - and successful - attempt to bring Latin America's first covered bond to market in September. The $200 million 2017 issue generated $500 million in orders from 70 accounts.

Other ground broken included the $1 billion junior subordinated tier 1 perpetual for Banco do Brasil, the region's first bank bond designed to be Basel III compliant, offering several flexibilities within the structure to allow for changes once Brazil's government defines its Basel III rules.

A 1 billion yuan ($120 billion) 2015 bond from América Móvil was LatAm's first Dim Sum issuance. That trade and Pemex's A$150 million ($156 million) issue opened new markets that regional borrowers had long wanted to tap.

Perhaps only Citi and Santander can boast a domestic debt market reach matching that of HSBC. In a September reopening of the Mexican road securitization market, Red de Carreteras de Occidente's (RCO) 8.12 billion peso ($624 million) transaction was the first deal of its type in nearly a year. The 930 million real ($508 million) Driver Brasil One Fundo de Investimento em Direitos Creditórios (FIDC) transaction in April broke new ground for ABS deals in Brazil, with features including the first pass-through amortization structure.

"We have had a busy last quarter and a strong pipeline," Bouazza says. "We will continue to see an issuance trend in dollars and local currencies and expect the low rate environment to continue for now. In terms of spreads, there has been a bit of a pushback from investors given that yields are reaching very low levels, but appetite remains solid and deals have been well received." LF



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