In a busy year for Latin capital markets, law firm Cleary Gottlieb once again demonstrated its broad expertise across product areas, taking part in several of the most important transactions of 2012 in a range of asset classes.
Activity in Brazil was less than in the past, but other countries, notably Mexico, were there to pick up the slack, says partner Jorge Juantorena. Cleary Gottlieb advised banks for petrochemical producer Alpek on two deals. It represented the bookrunners in Alpek’s May 2012 IPO and the banks working on its subsequent debut global bond offering in November.
The Grupo Alfa unit’s IPO was the first in Mexico this year and was oversubscribed, with 50% going to domestic accounts and 50% to international accounts. Later in the year, it worked as underwriter’s counsel for Mexichem, a $1.2 billion capital increase and $600 million debt and liability management deal.
In Chile, it acted as counsel to Codelco in its $1.9 billion financing from Mitsui and related deals, and helped negotiate a 29.5% buy of Anglo American Sur from Anglo American and Mitsubishi.
“Just as Brazil cooled off a bit, Mexico and Chile heated up,” Juantorena says. With offices in Argentina for the past few years and an office in Brazil that opened last year, the firm still has most of its LatAm resources based in New York.
Another notable ex-Brazil deal, he says, is Peru’s Cementos Pacasmayo, the country’s third-largest cement producer, which launched its first ADR in February, raising $264 million. Cleary Gottlieb acted as underwriter’s counsel in the IPO, one of the few to be SEC-registered.
Juantorena highlights the number of Mexican IPOs in the pipeline, driven by the wave of confidence after the recent election and the fact that it came out both predictably and without much disruption after the results were announced.
“The perception is that Mexico is undervalued so investors who are investing in LatAm often feel they’re overexposed in Brazil and underexposed in other places and looking to invest there,” he says.
Investors seem to sense more stability there, he says. The bulk of deals should come in the first quarter of 2013 and their reception should be a good indicator for how the rest of the year pans out.
“It’s going to be very telling, if they are able to go, because IPOs are among the most delicate types of deals,” he says. Healthy activity continues in Brazil, with activity in Chile on the rise.
The number of debt restructurings is likely to decrease in the coming year, and Juantorena expects they will account for 10% of deal flow from the region, from 20%-25% in 2012, as economies improve.
One of the firm’s most noticeable deals this year was a $6.2 billion debt exchange for Cemex. It was both large and complicated, he says, involving “virtually every major bank in New York, London and Mexico.” Cleary Gottlieb advised the bank steering committee.
“People expect complete dedication and commitment, so as a lawyer, that’s one of the most fun types of projects to work on,” Juantorena says.
In the sovereign space, the firm worked on a 2.2 billion peso deal in August for the Mexican government, and also in December 2011 it advised on a 2.2 billion peso deal for Uruguay.
Juantorena says more M&A deals are on their way although business related to those deals is shifting away from using US firms in many cases to using local counsel, as the quality of local firms continues to improve.
“A lot more M&A activity is being governed by local laws,” Juantorena says. “People will still hire US counsel for the large to extra-large deals but for the deals that are just medium to large, people will use only local counsel.”
Bond deals will continue to be a major focus. The low interest rate environment has prompted large volumes of bond deals, he says, alongside cash tender offers involving debt. Moreover because of the general financial uncertainty in Europe, he says: “Latin America looks relatively stable by comparison.” LF