Despite the continued uncertainty looming over the global
economy, Latin American issuers have much to celebrate in 2012
- and much to be optimistic about in 2013.
The winners of this year's LatinFinance Deals of the Year
exemplify the increasing importance and appeal of Latin
American assets and the growing size and innovation of
transactions. Although this is a theme that has been emerging
for many years, it is only in the last two that the region has
truly come to be seen by investors as more than just a
Best Law Firm
Best Law Firm
Best Law Firm Latin
Best Trade Finance
Best Local Currency
Best Domestic M&A
Best Cross-Border M&A
Best Private Equity
Best Initial Public
Best Corporate Liability
Best Corporate High-Yield
Best Corporate High-Grade
Best Sovereign Liability
Best Loan House
Best Equity House
Best Bond House
Best Sovereign Issuer
Large and sophisticated debt capital markets transactions were
the highlights of this year's awards. Indeed, several deals
that were considered ordinary in this year's awards period -
from October 1, 2011 to September 30, 2012 - would have been
regarded as groundbreaking just a few years ago. High-grade
issues have come at lower than ever spreads attracting a wide
range of investors. High-yield debutants have popped up from
unexpected corners. Cemex pushed a wall of debt back three
years, with overwhelming acceptance from the market. Bolivia -
with its first international offering since the 1920s - in
October issued a bond with a yield of under 5%.
Appetite from the buy side has been immense. "There has been
a lot of inflow from institutional investors this year," says
Blaise Antin, head of TCW's sovereign research team. "We don't
think that's going to change in 2013."
The volume of straightforward bond issuance shouldn't
distract from the innovations that are still appearing: Banco
do Brasil has led the emerging markets in preparing its
borrowing for Basel III regulations; an issuer that is not even
the biggest bank in Panama raised the first covered bond in the
emerging markets outside of Korea; and a $7 billion
four-tranche bond sale is not easy, even for Petrobras.
"As we become a more mainstream asset class we see a lot of
crossover investors embracing emerging markets, and they want
things in a nice standardized package, recognized, and liquid,"
says Chris Gilfond, co-head of LatAm DCM at Citi. "There has
been a huge surge in volume and while that defines the bulk of
the business, within that there is still a bit of innovation
"Emerging market debt is eventually going to look a lot like
the US fixed income market," Antin says. "There will be a lot
of hard currency debt, corporate debt and local currency debt,
and you'll have a number of different strategies that segment
the asset class."
The local markets have been fertile grounds for testing new
Pemex and Peru both inaugurated global depositary notes for
all-in-one global-local currency and domestic market sales.
América Móvil later went one better with such a
seamless sale within a single security. In Brazil, lower rates
drove record local bond issuance, Volkswagen's Driver One broke
new ABS ground and the infrastructure debenture class may have
finally gotten off the ground towards the end of 2012.
Sovereigns didn't struggle, with sub-investment-grade names
getting rock-bottom rates and the highest rated names engaging
in sophisticated liability management transactions that would
be the envy of many developed-world nations. Mexico even
entered the Japanese market without a guarantee.
Bankers, however, point out that with increased success come
increased investor and issuer expectations. A deal may get 17
times book one day -as did Mexichem's - but find the next day
the window has closed.
Though today's costs in the bond market are hard to beat,
LatAm projects and companies again have the loan market as an
option. Several deals coming out in the final months of 2012
suggest a more robust crop in the future. To the extent they
are able, European, US and Asian lenders want to lend to solid
LatAm credits, such as Ternium. Regional banks are picking up
the slack when these foreigners' balance sheets don't allow
them to lend.
LatAm assets offer an alternative to the slow growth and
financial ill-health in Europe, the US and Japan. Companies
from across the world are eager to buy into LatAm peers with
healthy balance sheets and sky-high growth potential. They face
more competition than ever from a greater number of growing
LatAm powers. CorpBanca, Cencosud and Grupo Sura are just a few
examples of companies transforming themselves into major
"The pipeline is building every day," says Javier Vargas,
co-head of investment banking for Latin America at Credit
Suisse. "Companies are much more open to take advantage of
getting capital and putting it to work and using it to
Others, such as Mexico's América Móvil and
Mexichem, have moved to pick up European operations at rock
bottom prices. Moreover, there is still consolidation ahead in
big markets like Brazil and Mexico.
There is even hope for the equity capital markets, a class
severely underperforming its historical levels. Transactions
from Santander México, Cencosud, Cementos Pacasmayo and
Fibra Uno have shown the potential of issuance from Mexico and
the Andean nations. Provided they are ready to come to market,
investors are taking a serious look at companies from these
BTG Pactual and Taesa have shown that investors still want
quality names from Brazil. Falling valuations should mean
greater investor interest in the year ahead.
2013 should be a strong year. More high-yield debt issuance,
which was only about 20% of the bond volume in 2012, could be
in the works. A few pulled transactions in late 2012 had people
wondering about a bubble.
"You eventually run up against risk of issuance by issuers
who aren't very strong, but we haven't seen too much of that
this year," says Antin. LatAm high-yield corporates are
generally in better shape than high-yield borrowers
A rerun of the economic conditions in 2012 would not prove
disastrous for Latin American debt issuance. Europe's problems
may appear set to continue but last year they had negligible
impact on LatAm activity. An economic hard landing for China
now seems less likely than before, though there is no certainty
about this. While near term fears over the US fiscal cliff have
receded, a bitterly divided Congress will continue to bedevil
economic policymaking in the world's largest economy - a fact
that could weigh on issuers hoping for a clear market this
But barring a major financial shock, similar levels of
activity are likely in M&A, and more business is expected
in the syndicated loan and equity capital markets - and perhaps
even another record year in DCM.
For now, however, we toast the standouts of 2012.