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Brazilians close ECM year on low note

Dec 13, 2013

Via Varejo became the latest Brazilian equity issuer to price a deal below its range. Elections and the World Cup could make for a challenging 2014.

Brazilian retailer Via Varejo became the latest Brazilian equity issuer to fall short of expectations Thursday. The operator of businesses including the Casas Bahia and Ponto Frio chains had been aiming for more than 3.9 billion reais ($1.22 billion), and raised 2.85 billion in an equity follow-on. Shares priced at 22.00 reais, 7.60 reais below the range.

CVC Brasil Operadora e Agencia de Viagens came below the range when raising 621 million reais in its IPO earlier this month. The pattern of disagreement between buyers and sellers stretches back to the end of the 2009 financial crisis. Only large IPOs from visible issuers, such as BB Seguridade this year and BTG Pactual last year, have seemed able to escape, with a few notable small exceptions, such as IT provider Linx.

A number of issuers have elected to put off deals until the beginning of 2014. In recent months this has included transportation services providers Unidas, Sacar and Ouro Verde. At least Unidas has indicated it will look to try again next year. Fras-le, a Brazilian maker of vehicle parts that is part of the Randon group, has filed to raise funds through a follow-on equity offering. If there is access for Brazilians next year, it will likely be shifted toward the beginning of the year, ahead of the World Cup and presidential elections.

Challenges for Brazil in 2014 might mean more visibility for transactions coming from the rest of the region. Issuers from Mexico, Peru, Colombia and Chile are already have taken an uncharacteristically high portion of the issuance in 2013. Brazilians' $14.2 billion ECM volume had accounted for about 38% of the region's $37.1 billion through Friday, according to Dealogic data. Mexicans accounted for 32% and Andeans 25%.

A series of Andean follow-ons is set to round out the year in late December. Banco de Bogotá was raising $517 million-equivalent in a transaction that should close next week. Parent Grupo Aval was due to open its own $1.25 billion-equivalent sale as soon as next week, partially to raise funds to participate in the Banco de Bogotá transaction. Latam Airlines is set to close the rights offering period for a $963 million-equivalent follow-on next week.LF


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