The Deals of the Year winners from Americas.

Bonds: corporate 

WINNER: Verizon $49bn bond

Bookrunners: Barclays, Mizuho, JPMorgan, Morgan Stanley, RBC Capital Markets, Wells Fargo Securities, RBS, Barclays, Mitsubishi UFJ Financial Group, Credit Suisse, Citi, Bank of America Merrill Lynch

HIGHLY COMMENDED: Petrobras $11bn bond; Province of Chubut $220m bond

It was impossible to miss US telecoms company Verizon’s $49bn bond last year, by far the largest ever corporate bond in history – easily surpassing the previous $17bn record by Apple. The wave of debt paper hit capital markets in September and attracted an order book worth about $100bn – twice the size of Apple’s issuance.  

Admittedly, Verizon’s corporate’s debt was sold at generous levels compared with that of other similarly rated bonds – indeed, both record-breaking bonds jumped in secondary markets rewarding investors who bought the securities at discount prices. But the challenging timing of the Verizon issue and the rationale behind it should not be overlooked. 

Verizon needed to raise funds to help finance its $130m buyout of the 45% stake held by Vodafone in its wireless operations, making the mammoth bond a requirement for the success of the deal. Furthermore, the $49bn-worth of debt, sold in a combination of fixed and floating-rate notes and spread across eight tranches and six maturities ranging from three to 30 years, needed to be executed at a time of high uncertainty in the markets, with the US Federal Reserve already considering the tapering of its quantitative easing policy. Recognition should, therefore, be given to the issuer and bookrunners for seeing the bond deals, and subsequent acquisition, through.

Other transactions that warranted highlighting: Brazil oil giant Petrobras’s $11bn bond – the largest emerging markets bond issuance on record and one of the top five dollar-denominated debt issuances of all time – and the $220m bond issues for the Province of Chubut in Argentina. This transaction is not only the most sizable in the nearly non-existent sub-sovereign local debt capital market of the country, but thanks to the clever use of collateral, it also made capital markets a viable alternative to bank borrowing or securitisation.

Bonds: SSA 

WINNER: Freddie Mac $500m notes 

Sole advisor, structuring lead, sole bookrunner: Credit Suisse 

Joint lead: Barclays Capital 

Co-managers: Morgan Stanley, Citigroup, CastleOak

HIGHLY COMMENDED: Province of British Columbia’s Rmb2.5bn bond; United Mexican States’ €1.6bn bond

A landmark deal for the US’s mortgage market, Freddie Mac’s Structured Agency Credit Risk debt notes, Series 2013-DN1 (STACR 2013-DN1) achieved key government policy objectives while laying the groundwork for the future issuance of agency credit risk. STACR 2013-DN1 allowed the transfer of credit risk from Freddie Mac, which is a government-sponsored enterprise (GSE), to other market participants. It also gives mortgage investors, for the first time, the opportunity to participate in the broader credit risk transfer initiative set by the government for its GSEs. 

STACR 2013-DN1 notes are unsecured general obligations designed to provide credit protection to the issuer. They are subject to the credit risk of a pool of residential mortgage loans, which are guaranteed by Freddie Mac. The mortgage corporation pays a coupon on the two $250m-tranche notes, while its obligation to repay principal on the debt is reduced for credit events on the reference loan pool – for example, on loans that are delinquent for over 180 days – based on a fixed approach related to the severity of the event.

Along with Fannie Mae, Freddie Mac is the two largest GSE in the US. Both have planned to issue similar notes on a quarterly basis in 2014. STACR 2013-DN1 established a structural model as well as secondary liquidity for future transactions as part of this issuance programme and Fannie Mae’s first credit risk transfer transaction, CAS 2013-C01, was structured almost identically to the Structured Agency Credit Risk model.

Also worthy of commendation was the groundbreaking Rmb2.5bn bond for the province of British Columbia, the first ever renminbi benchmark transaction from a Canadian issuer and the largest renminbi issue ever from an international entity. The Ä1.6bn bond for the United Mexican States, which brought Mexico back to the euro market for the first time since 2010, was also highly commended. It was the largest ever euro-denominated bond from a Latin American issuer and the first ‘euro for euro’ liability management in the region.

Equities 

WINNER: Twitter $2.1bn IPO

Left lead bookrunner: Goldman Sachs 

Bookrunners: Morgan Stanley, JPMorgan, Bank of America Merrill Lynch, Deutsche Bank

HIGHLY COMMENDED: Banco Santander Mexico’s $2bn IPO

The most hotly anticipated technology listing of 2013, Twitter’s $2.1bn initial public offering (IPO) gave the micro-blogging platform funds to expand the business and embark on an acquisition campaign. After the technical glitches that tripped up a previous high-profile tech IPO, when Facebook came to the market with a deal that many accused of being too big and too expensive and where shares struggled for months, Twitter aimed at a smooth, successful execution, which is exactly what the company got. 

The fact that stocks rose by more than 70% on the first day of trading did not faze the company, despite the fact that the higher valuation at the first day’s closing price would have provided an additional $1bn. Some analysts, in fact, still considered Twitter’s offer price too expensive, particularly for a company that was listing with a profit-and-loss account in the red. 

Smooth execution was a key concern. Maximum confidentiality was kept in the lead up to the deal to reduce risk of leaks: the issuer utilised the ability to submit draft registration statements confidentially and it appointed Goldman Sachs as sole bookrunner until immediately prior to public filing. The bank worked closely with Twitter management to build a solid, reliable shareholder base, and focused marketing efforts around high-quality mutual fund investors and concentrated allocations to investors that the issuer believed will be with the company for the long run.

Twitter’s IPO capitalised on a number of game-changing trends: the sustained shift of advertising online; the significance of and engagement with social media; the expanding importance of mobile internet and the leverage effect it has on social media. This was the deal that best embodied such trends over the past few years.

Away from tech and on the more traditional territory of banking, Banco Santander’s listing of its Mexican operations was highly commended. It not only fortified the group’s strategy of expanding international businesses by allowing them to raise funds locally, it also sent a clear signal about the growing depth of Mexico’s stock market. 

FIG capital raising 

WINNER: Five Corners Funding Trust $1.5bn 10-year P-Cap trust securities for Prudential Financial

Sole structuring advisor: Credit Suisse 

Bookrunners: JPMorgan, UBS, HSBC, Wells Fargo Securities, Barclays, Credit Suisse

HIGHLY COMMENDED: Banco Santander Mexico’s $1.3bn Tier 2 bond; Banco de Chile’s $830m equity sale

The pre-capitalised trust securities (P-Caps) structure put together for Prudential Financial is the largest contingent capital raised for an insurer in the US. Prudential is the second largest US life insurer and has received a ‘systemically important financial institution’ designation from the US’s Financial Stability Oversight Council. 

The P-Caps provided Prudential with an alternative source of capital and allows it to convert the $1.5bn debt raised into equity under certain conditions. 

Structurer Credit Suisse notes in particular the benefits offered by the structure over traditional liquidity sources such as bank lines, as P-Caps do not present counterparty risk and are offered at a fixed cost for 10 years. They also do not contain the covenants typical of bank products. Furthermore, through a put option, Prudential was given the right to issue senior notes to the trust and receive Treasury securities at any time, including if its credit condition deteriorates. The senior notes are exchanged for the high-quality collateral – such collateral was purchased with the proceeds raised from the issuance of the P-Caps and held in the trust for the benefit of investors. As long as the put option remains unexercised, the P-Caps have the added benefit of being treated as off-balance-sheet securities.

Investors showed great interest in the securities. The $5bn order book was formed by high-quality accounts and the transaction was priced at a relatively low T+175 basis points, at the lowest end of the price guidance for a 4.419% coupon. The P-Caps spread over US Treasuries represents a premium of only 50 basis points over the spread of Prudential’s 10-year senior unsecured bonds.

Our judges also commended Banco Santander Mexico’s $1.3bn bond offering, the first Basel III-compliant Tier 2 transaction out of Latin America, as well as Banco do Chile’s $830m equity sale, successfully executed at a time of challenging economic and political conditions in the country.

Infrastructure and project finance 

WINNER: Odebrecht Offshore Drilling’s $1.69bn project bond

Global coordinators: Itaú BBA, HSBC, Morgan Stanley 

Bookrunners: Banco do Brasil, BNP Paribas, Banco Santander 

Co-managers: Crédit Agricole, DNB, MUFG, Natixis

Because of sluggish economic growth and the overwhelming infrastructure needs of Brazil, the viability of some of the planned projects to upgrade its infrastructure network has been questioned. The $1.69bn raised through a project bond by Odebrecht was a bright spot in the infrastructure market and attracted twice as many investor orders than the company could meet. The deal is the largest project bond issued outside the US, the largest ever single-tranche project bond globally, and the first investment-grade Brazilian project bond rated by the three major rating agencies.  

Odebrecht Offshore Drilling is a subsidiary of Odebrecht Oil & Gas, one of the largest oil and gas upstream service providers in Brazil, and the deal refinances three ultra-deep-water drilling rigs – ODN I, ODN II and Norbe VI – where assets are chartered under long-term contracts to Petrobras, the national energy giant and developer of Brazil’s pre-salt oil facilities. This was a key feature of the transaction. 

The ultimate parent of the issuer, Odebrecht, is one of Brazil’s largest engineering groups which operates in a number of sectors, including infrastructure projects such as railways, airports and football stadia, and has been active in some 40 countries over the years. However, it is privately held and does not routinely provide balance sheet information, though its solid and long-standing connection with Petrobras proved to be very appealing to investors.

Funds were raised on the international capital markets and were sold almost at face value, providing a 6.75% yield that mirrors the coupon rate. The timing of the deal is also of note, as a bond planned a month earlier had to be held back because of the large sell-off in emerging-market assets sparked by fears that the US Federal Reserve would be reducing its bond purchases.

Loans 

WINNER:  $700m senior unsecured holding company term loan for Bausch & Lomb’s holding company

Left lead arranger: Citi 

Mandated lead arrangers: Barclays, Blueridge Capital, Citi, Credit Suisse, Goldman Sachs, JPMorgan, Morgan Stanley, UBS

HIGHLY COMMENDED: Acquisition financing for Valeant Pharmaceuticals International’s $8.7bn takeover of Bausch & Lomb, 208m pesos loan for the Mexican municipality of Cajeme

Private equity investor Warburg Pincus took over Bausch & Lomb in 2007 when the US eye health products company was in a dire state, dealing with lawsuits and admitting to irregularities in its accounts. Six years later, the investor was ready to sell. At the time of the takeover offer by Valeant Pharmaceuticals, Warburg Pincus had planned its exit through an initial public offering (IPO). 

The $700m loan put together to provide a dividend to shareholders, which would have been repaid by the IPO, turned out to be very handy when the takeover offer came in, as the structure could be speedily and profitably used by Warburg to repay shareholders before it sold its stake to the pharma group. The deal saved Warburg more than $40m when compared with a bond issue, which would have been a more conventional choice, and it was a very profitable trade for the banks too, according to Citi, which underwrote the loan.

The tailored loan syndication provided the desired structural flexibilities and resulted in an order book that was significantly oversubscribed among 27 of the largest investors in the leveraged credit markets. The structure appealed to both high-yield and loan investors, at a time of strong demand for short-duration and floating-rate paper. 

The 208m pesos ($15.93m) loan for the municipality of Cajeme in the north-western Mexican state of Sonora was highly commended. It used an ingenuous structure that will encourage the creation of a new market in Mexico by using state and municipality revenues as a loan’s underlying assets – property tax in the case of Cajeme, where tax revenues are projected to grow faster than the debt service payment, making the structure sustainable and keeping financing costs in line with average bank loans in the country. 

M&A

WINNER: SoftBank $21.6bn acquisition of Sprint Nextel

Financial advisors to Sprint Nextel: Citi, Rothschild, UBS, Bank of America Merrill Lynch 

Financial advisors to SoftBank: Raine Group, Mizuho, JPMorgan, Goldman Sachs, Deutsche Bank, Credit Suisse

The acquisition of Kansas-based Sprint Nextel by Japan’s SoftBank created the second largest telecommunication company by number of retail wireless subscribers in the US, and the world’s third largest seller of smartphones.

The deal was anything but straightforward. After an initial attempt to acquire Sprint Nextel, SoftBank faced competition from an unsolicited offer by another suitor, which was eventually turned down following a revised, more flattering proposal by the Japanese company. At the same time, Sprint Nextel had also entered negotiations to purchase the shares it did not already own in competitor Clearwire, which in turn received a counter offer, later refused, by the same company challenging SoftBank’s takeover of Sprint Nextel. 

SoftBank was established in 1983 by its ambitious chairman and chief executive Masayoshi Son, and has based its business growth on online products and services – it is Japan’s second larger wireless carrier by number of subscribers, with a market share of about 30%. It also owns 42% of Yahoo! Japan and has large stakes in e-commerce Alibaba Group and Chinese social network Renren. Mr Son was determined to incorporate the then third largest carrier in the competitive US market into his expanding group – the $21.6bn deal became the largest ever Japanese investment in a US company. 

SoftBank’s investment consisted of $16.6bn to be distributed to Sprint Nextel shareholders and of $5bn of new capital to strengthen its balance sheet. Under the initial offer, shareholders would have received a lower amount while cash injected into the target would have been higher. Approximately 72% of current Sprint Nextel shares were exchanged for $7.65 per share in cash, and the remaining shares converted into shares of a new publicly traded entity, Sprint Corporation. As a result, SoftBank owns approximately 78% of the new company and Sprint Nextel’s existing equity holders own approximately 22% of the shares of Sprint Corporation on a fully diluted basis.

Real estate finance 

WINNER: $2.1bn syndicated loan for Blackstone Invitations Home 

Sole structuring agent and lead bookrunner: Deutsche Bank 

Co-lead bookrunners: Credit Suisse, JPMorgan

HIGHLY COMMENDED: $135m securitisation for RAIT Partnership

The $2.1bn syndicated loan for private investor Blackstone is the first ever syndication of a loan backed by single-family residential rental properties, and a deal that has the potential to revolutionise the real estate finance market. 

Blackstone is one of the first major companies to enter the buy-to-let sector in the US, which previously had been dominated by family-run businesses. The company needed a new source of financing to develop its buy-to-let real estate operations, but what the traditional bank loan market could offer was insufficient to fuel Blackstone’s expansion plans. 

The $2.1bn revolving credit facility for Invitation Homes, the largest owner and manager of single-family rental properties in the US and a subsidiary of Blackstone’s BPEP VII credit fund, provided the needed capital. It also added innovation in the challenging real estate finance market through the type of assets used to back the transaction and its size: a portfolio of about 25,000 homes.

The transaction received a very strong reception from fixed-income investors because it provided exposure to the housing market’s recovery in a number of key real estate markets across the US. Money managers represented the vast majority of investors, with a good participation from hedge funds, followed by more limited purchases by pension funds, insurance firms and banks.

By creating the right conditions for certain large investors to move into the business for the first time and to take on a wider range of properties than they could before (now including single-family rental property), the structure injected new energy into the revival of the US property market. 

Highly commended was the $135m securitisation for RAIT Partnership – RAIT 2013-FL1 – the first collateralised loan obligation based on commercial real estate assets since the financial crisis to include property types other than multi-family (property accommodating more than one family).

Restructuring 

WINNER: American Airlines exit from Chapter 11 bankruptcy and merger with US Airways Advisors to American Airlines: Rothschild, Deutsche Bank

Advisors to American Airlines’ unsecured creditors: Houlian Lokey, Moelis & Co 

Advisors to US Airways: Barclays Capital, Millstein & Co

American Airlines emerged from bankruptcy on December 9, 2013, after two years spent under so-called Chapter 11 rules, when it closed an all-share merger with US Airways. This is a rare restructuring of one of the largest non-financial bankruptcies in US history, as it combines recapitalisation efforts with merger talks while still being governed by bankruptcy rules. 

The deal was particularly complex as it also provided American Airlines with the alternative to exit Chapter 11 as a standalone carrier – alongside the combined entity option, which was preferred – while dealing with a multitude of constituents: from debtors and pre-Chapter 11 equity holders, to various unions and US Airways stakeholders. Furthermore, the restructuring gave creditors the opportunity for a full recovery on their claims and old American Airlines’ equity holders an opportunity for a satisfactory recovery, a rare outcome for equity in bankruptcies.

The restructuring and merger transaction also set a new precedent for labour and management partnership within the airline industry. The new entity, American Airlines Group, is the world’s largest airline by revenues and has retirement and medical benefits in line with industry leaders. It also has one of the lowest leverages of any major US network carrier, as well as some of the lowest non-labour costs of any major US carrier. 

The merged group has combined revenues of $41bn; old American Airlines’ creditors, labour and old equity holders will own 72% and US Airways shareholders will own 28% of the combined company. The markets welcomed the transaction. On its first day out of bankruptcy, American Airlines’ shares traded up 8% on the day to value the company at nearly $18bn. 

The deal is also unique as Deutsche Bank, which raised a phenomenal $5bn for the carrier while in Chapter 11, identified a new source of collateral: the future cash flows from its South American routes, which helped the firm to raise nearly $3bn at very cost-effective rates of interest.

Securitisation 

WINNER: MetroCat Re’s $200m catastrophe bond for the New York Metropolitan Transportation Authority

Joint structuring agents: GC Securities, Goldman Sachs

HIGHLY COMMENDED: Syngenta’s 83m reais agribusiness CDO

As a result of the devastating effects of Hurricane Sandy in October 2012, the New York Metropolitan Transportation Authority (MTA) suffered losses of about $5bn in 2013. A portion of these were, of course, covered by the MTA’s insurers, but as a consequence, insurance costs spiked as ongoing premiums rose significantly; the MTA’s ability to secure cover reduced dramatically too.  

An alternative could have been a traditional catastrophe bond covering hurricane risk, but this would have been too wide-reaching (and costly) as underground tunnels, for example, which represent a big part of a city’s transport network, are hardly affected by gale-force winds. MTA needed cover at an affordable price but the conventional markets could not offer it.

Goldman Sachs and GC Securities, the securities division of reinsurance broker Guy Carpenter, found a solution. Through a Bermuda-licensed special purpose insurer, MetroCat Re, the structuring agents enabled the MTA to get insurance cover in the capital markets at costs lower than could have been achieved in a traditional way. This is the first catastrophe securitisation for the MTA and the first catastrophe bonds focused solely on the peril of storm surge. 

The notes, in fact, addressed specifically the threat of coastal flooding in New York City and use an innovative statistical trigger – based on water levels at selected tidal gauge locations – that had been designed to provide effective coverage for a public entity in the aftermath of a catastrophe event. 

The notes were distributed globally to catastrophe funds, hedge funds, pension funds, money managers and reinsurers, which welcomed the novelty structure. The initial $125m on offer grew by 60% and pricing was tightened to 450 basis points (bps) from to initial price guidance of 500bps to 550bps.

PLEASE ENTER YOUR DETAILS TO WATCH THIS VIDEO

All fields are mandatory

The Banker is a service from the Financial Times. The Financial Times Ltd takes your privacy seriously.

Choose how you want us to contact you.

Invites and Offers from The Banker

Receive exclusive personalised event invitations, carefully curated offers and promotions from The Banker



For more information about how we use your data, please refer to our privacy and cookie policies.

Terms and conditions

Join our community

The Banker on Twitter