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Turmoil threatens equity pipeline 0

Jun 19, 2013

The threat of a hike in US interest rates and subsequent EM selloff has meant a rest for LatAm’s busy debt capital markets. A heavy equity pipeline has filled up for the June-July window, with issuers eager to get out while they can. It is now clear not all will make it.

The poor market conditions, along with an aggressive valuation and poor news coming out of Brazil, have derailed the ambitions of Votorantim Cimentos. The unit of the Votorantim conglomerate had been targeting 8 billion reais ($3.7 billion) in what might have been the biggest IPO of the year in the region. The issuer still may try again later in the year.

Other Brazilians remain in the pipeline, but have yet to launch. CPFL Energia, which pulled an IPO attempt last year, is the largest, and is joined by airline Azul. Follow-ons from Brazil or anywhere else in the region still stand a reasonable chance of getting done, bankers say, especially if issuers are flexible on the pricing. Via Varejo, MPX and Klabin are targeting fresh funds.

In Mexico, a follow-on from OHL Mexico will give the market its first idea of the viability of follow-ons from large well-established names. The road operator is targeting 8 billion pesos ($621 million). A $3 billion deal from Banorte awaits in July, and developer Vesta is also planning on raising additional  funds. Next week, Inbursa and airport operator OMA are scheduled to have all-secondary share deals representing selldowns of CaixaBank and ICA, respectively.  

The $230 million IPO of Hoteles City squeaked by last week, but airline Volaris could face a tougher battle if poor market conditions persist.

Peru’s Grana y Montero was still heard planning to launch a follow-on that would represent the debut of its US ADS.

Investors note much hinged on the news from Wednesday’s US federal reserve meeting. A positive tone could help both debt and equity issuers. ECM has been looking at a potential record year. LatAm equity issuers raised $19.80 billion from 41 transactions in 2013 through June 14, compared to $8.52 billion from 35 during the corresponding period in 2012. LF


Market Troubles Claim ECM Victim

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