The Deals of the Year 2018 winners from the Americas.

Bonds: Corporate 

WINNER: Braskem’s $1.75bn bond 

Bookrunners: BNP Paribas, Crédit Agricole CIB, Itaú BBA, Morgan Stanley, Santander, SMBC Nikko, UBS

After a long absence, Braskem pulled off one of the biggest private sector bond deals ever from Brazil. And it was able to price its dual-tranche new issue inside its existing curve.

Braskem produces a diversified portfolio of petrochemical and thermoplastic products, with a strategic focus on thermoplastic resins. It is, in fact, the largest producer of thermoplastic resins in the Americas, as well as being Brazil’s only domestic producer of ethylene, polyethylene and polypropylene.

While the company has 29 plants in Brazil, it has another six in the US, two in Germany and four in Mexico. 

As an issuer, Braskem had not visited the international bond markets for nearly four years. So it decided to conduct a roadshow in order to reprofile the credit, pave the way for a new issue, and rally the secondary market as more investors were reminded of the good story it had to tell.

With a focus on investment-grade accounts in particular, teams visited New York, London, Boston and Los Angeles over two days. During the roadshow, Braskem compared the credit to global peers such as LyondellBasell, highlighting the attractive relative value of the company.

After positive feedback, the company announced a dual-tranche deal with initial price thoughts around the 4% area for a new long five-year, no-grow $500m bond and 5% area for a long dollar benchmark 10-year tranche. The demand from real money accounts was impressive, and the order books reached $8bn.

Guidance was tightened to the 3.75% area plus or minus 5 basis points (bps) for the five-year tranche and 4.75% plus or minus 12.5bps for the 10-year tranche, and the deal was eventually priced to yield a respective 3.7% and 4.625%. That represented new issue premia of -5bps and -10bps, respectively.

Bonds: SSA 

WINNER: Argentina’s $2.75bn century bond 

Joint bookrunners: Citi, HSBC 

Co-managers: Nomura, Santander

Argentina has defaulted on its debt eight times since 1828, yet it keeps coming back to market and investors keep buying the paper. Now it has managed to sell its first 100-year bond – sub-investment grade – for which demand outstripped supply more than three times over.

Argentina’s last default was as recently as 2014. But after a reforming pro-business government came to power, it came back in spectacular style in April 2016 with a four-tranche $16.5bn deal, attracting orders of $69bn. The century bond must be viewed in the context of this new confidence in the government’s economic policies.

This was the second emerging market sovereign to issue a 100-year bond. The first was also from Latin America – Mexico, which issued in 2010, and tapped in 2011. According to HSBC, the transaction was first mooted after investors expressed interest. In April, Standard & Poor’s upgraded Argentina from B- to B.

It was decided to execute an intra-day transaction, to minimise exposure to potential market volatility. On a June day, early morning New York time, Argentina announced a 144A/Reg S US dollar century bond with initial price thoughts in the 8.25% area for a benchmark size transaction. The deal was very well received by the market, with the order book reaching more than $10bn from nearly 400 accounts. 

Unusually, given the strong appetite and the duration offered, Argentina was able to bypass a revised guidance stage. Instead, it moved directly to announce a $2.75bn deal, with a coupon of 7.125%, priced to yield 7.917%. This was the largest 100-year transaction on record, and the first to be sold by a sub-investment-grade issuer. 

Bonds: FIG 

WINNER: Pacific Life’s $750m surplus notes and tender offer 

Dealer managers on tender offer: Citi, Credit Suisse, Goldman Sachs. 

Bookrunners on bond: Barclays, Citi, Credit Suisse, Wells Fargo

Pacific Life set a new benchmark for surplus notes, with a new structure that optimises its capital profile while avoiding the significant carry costs associated with bullet instruments.

Surplus notes are hybrid instruments issued by insurance companies, deeply subordinated but, from Standard & Poor’s, receiving 100% capital credit until 20 years before maturity. Historically, they have been issued in bullet format – say, 30-year or 60-year. But this format is inferior as the issuer loses capital credit while still having to pay 20 years of fixed-rate coupons at the back end.

Earlier callable structures have tried adding a call date at year 10 or 20, but these generated little demand. Credit Suisse says it devised the 50-year non-call 30-year structure with a 100 basis points (bps) step-up to avoid these carry costs at the back end. The structure generates a superior S&P capital profile to a 30-year bullet at no additional cost, it says. The step-up gives Pacific Life an additional incentive to call after year 30.

The financing was carried out at the same time as a tender offer, targeting all outstanding senior and surplus notes for both Pacific LifeCorp and Pacific Life Insurance Company. The tender enjoyed a ‘high’ participation rate, in spite of being a repeat offer for the 2039 security, the highest coupon security in the pool. It was upsized from $500m to $573m.

The surplus note issue was also upsized, from $500m to $750m, and priced at 4.3% or T+150 basis points (bps), in from initial price talk of T+170bps. This was the tightest coupon in the company’s history for a senior unsecured or surplus note offering.



Financial adviser to CFE: Evercore 

Joint global coordinators: Evercore, Goldman Sachs 

Bookrunners: Barclays, BBVA Bancomer, Morgan Stanley, Santander

The initial public offering (IPO) of CFE’s Fibra-E opened Mexico’s public energy sector to a new form of financing. It was also the first time that this new asset class could be bought and traded by international investors. 

A Fibra is Mexico’s version of a real estate investment trust. The Fibra-E is a refinement of this, designed to encourage investment in energy assets. Like a master limited partnership in the US, it allows outside investment in assets with tax breaks for investors. While some Mexicans see this as privatisation by the back door, the companies retain control of the assets in the Fibra-E.

The Fibra-E was officially introduced in 2015, but has taken some time to get going. Comisión Federal de Electricidad (CFE) is Mexico’s state-owned electricity utility and, together with oil company Pemex, an obvious candidate for a Fibra-E. It acknowledges the time-consuming difficulties of preparation, which included various legal and regulatory changes, as well as the painstaking process of separating assets and revenues prior to placement in a trust. By February 2018, CFE was finally ready to come to market. 

The IPO was an all-primary offering of 750 million shares plus an over-allotment option of 112.5 million shares. As the first Fibra-E to be publicly traded in international markets, it attracted interest from investors in the US, Canada, UK, Chile and Australia, among others.

Market volatility towards the end of the roadshow did not help, but the transaction was ultimately oversubscribed. Initial demand was said to have been above 25bn pesos ($1.31bn). Proceeds ultimately totalled 16.38bn pesos, with the exercise of the over-allotment option. Local investors took 67% of the deal, with Mexican pension funds to the fore, while international investors bought 33%.

Green finance 

WINNER: Terna’s $81m green loan 

Financiers: BBVA, Inter-American Development Bank

The world’s first green loan with a project finance structure was signed by Italian transmission system specialist Terna with Inter-American Development Bank (IDB) and BBVA. It will be used to build a renewable energy transmission line in Uruguay. 

Terna is the largest independent transmission system operator in Europe. It manages Italy’s high-voltage transmission grid, and operates more than 72,000 kilometres of transmission lines. Among electricity sector companies, it has a solid reputation for environmental, social and corporate governance (ESG) and is included in international sustainability indices such as the Dow Jones Sustainability and FTSE4Good families.

The funding has two tranches. Loan A is for $56m, from the IDB with a 17-year tenor, while the $25m loan B was entirely subscribed by BBVA. This will allow Terna to build a 213-kilometres transmission line between a substation in the city of Melo and a future substation in Tacuarembó in north-east Uruguay. The line will connect projects for the generation of renewable energy to the country’s electrical grid, and is key to ensuring the current and future reliability of the national electricity system in Uruguay.

Once constructed, the line will be leased to UTE, Uruguay’s state-owned utility, for a period of 30 years, in return for a monthly tariff. UTE will be responsible for operation and management of the line, and will have the right to acquire it at the end of the operating lease agreement.

The entire financing has been defined as a ‘green loan’ by Vigeo Eiris – an agency that provides independent ESG ratings. Vigeo Eiris considers the loan to be in accordance with the Green Bond Principles. 

Leveraged finance 

WINNER: Golden Nugget’s $4.6bn financing package 

Bookrunners: Capital One, Citi, Citizens Bank, Deutsche Bank, Jefferies, Keybank, Rabobank

Texas billionaire businessman Tilman Fertitta wanted to buy the Houston Rockets basketball team – price $2.2bn. What followed was a mammoth and complex $4.6bn financing to fund one of the largest dividend recapitalisations ever. Jefferies was left lead arranger (and financial adviser on the subsequent Rockets purchase).

Mr Fertitta owns restaurant and gaming businesses that were previously financed separately – principally Landry’s, a 623-unit restaurant chain, and Golden Nugget, which owns and operates casinos. Jefferies recommended merging these into a single combined company, Golden Nugget Inc (GNI), and then refinancing GNI to generate a $1.6bn distribution. Meanwhile, restrictions governed by existing notes had to be adhered to.

The eventual financing package had four main elements: a $35m incremental revolving credit facility added to an existing $200m revolver; a $1.05bn add-on to an existing $1.28bn senior secured covenant-lite first lien term loan; a $745m tap of an existing $600m 6.75% senior note issue due 2024; and $670m of 8.75% senior subordinated notes due 2025.

To facilitate the deal, an existing $1.48bn secured credit facility had to be amended, requiring a 100% vote. 

The tap and the subordinated issue were well received by the debt capital markets and oversubscribed. The spread on the term loan, which priced at par, was tightened by 25 basis points. 

Constraints included an accelerated timeline, given the client’s desire to complete before the start of the basketball season. Hurricane Harvey struck Houston just before transaction launch, and Hurricane Irma hit Florida during syndication. GNI had significant restaurant exposure in both places.

Success was supported by the company’s record of strong free cash flow generation, and by significant asset protection. Eschewing sale and leaseback, the company owns most of its sites outright. 

Infrastructure and project finance 

WINNER: Ruta al Mar Toll Road 

Financial adviser to Construcciones El Cóndor: BTG Pactual 

Bookrunner and structurer of global-peso bond: Goldman Sachs 

Funding banks: Bancolombia, CAF-Ashmore, National Development Bank

The $491m-equivalent financing of the Ruta al Mar toll road was the first private initiative project in Colombia to be financed internationally. It included a Colombian peso bond with an investment-grade global rating.

In 2015, Construcciones El Cóndor was awarded a 34-year ‘private initiative’ concession to build or improve and operate 491 kilometres of road connecting the Colombian departments of Antioquia, Cordoba, Sucre and Bolivar. The roads link the Caribbean region, the Pacific coast and the country’s centre.

As a private initiative under Colombia’s fourth-generation toll road programme, the project does not receive government contributions or traffic top-up payments. The project is full traffic risk, backed only by the cash flow from toll collection.

BTG Pactual designed a special mechanism, the autonomous support sub-account (ASA), to fund an account that will compensate the concessionaire for certain risks. Created as an independent account in a concession trust, the ASA was key to the granting of investment-grade Baa3/BBB- bond ratings by Moody’s and Fitch. 

New toll stations were installed prematurely to mitigate non-instalment risk, and their collections will fund the ASA until all of the road’s eight functional units are completed.

The financing package included a Reg S/144A bond and three credit facilities by local banks. The 26.2-year Colombian peso bond raised 552bn pesos ($174m) at the inflation index plus 6.75%. The 1472bn pesos credit facilities were in three tranches: a 14.2-year Bancolombia loan of 280bn pesos; a 9.7-year National Development Bank loan of 400bn pesos; and infrastructure debt fund CAF-Ashmore’s inflation index-denominated 270bn pesos-equivalent tranche with a 20.2-year tenor.

Thanks to an atmosphere soured by Latin America corruption scandals, Ruta al Mar was the only project to achieve financial closure and disbursement in Colombia in 2017.


WINNER: Cerro Verde’s $1.5bn loan 

Joint lead arrangers and bookrunners: BNP Paribas, Citi, HSBC, MUFG

A $1.5bn syndicated loan to the Cerro Verde copper mine in Peru was one of the largest clean, unsecured financings to date for a single asset mining company in Latin America. It was designed to refinance an existing term loan of 2014.

Cerro Verde is Peru’s largest copper mine, some 30 kilometres south-east of Arequipa. Copper was first discovered there in the 19th century, and the present mine has been operating since 1972.

The borrower, Sociedad Minera Cerro Verde, is owned jointly by US miner Freeport-McMoRan (53.6%), Japan’s Sumitomo Metals & Mining (21%) and Peruvian miner Buenaventura (19.6%). The free float balance of 5.8% is traded on the Lima Stock Exchange.

The mine, which boasts the industry’s largest copper concentrator, produces 450,000 tonnes of copper annually, with molybdenum as its main by-product. Its last major expansion was completed in 2015, funded by a $1.8bn five-year term loan.

That too was a milestone deal, both in Peru, where it was the largest syndicated loan by any borrower for some years, and in Latin America, where it was among the biggest ever by a miner. Bankers liked the asset and the diversity factor and lined up to participate.

When this needed refinancing, the borrower turned to many of the same leads. The result was a $1.5bn five-year senior unsecured loan with 19 banks from the US, Canada, Europe, Australia and Asia. The transaction was oversubscribed, with more than $1.9bn commitments, even though copper prices had been having a volatile few months. 

Bankers say that a seamless execution, under a corporate structure, allowed an efficient closing, securing funds to refinance the existing debt of the project, extending the maturity profile. Once again, it was the largest syndication for a Peruvian borrower for some years.


WINNER: Potashcorp and Agrium’s merger of equals 

Advisers to Potashcorp: Bank of America Merrill Lynch, RBC Capital Markets

Advisers to Agrium: Barclays, CIBC Capital Markets

There are many so-called ‘mergers of equals’ but nearly always, in reality, one party acquires and the other is acquired. When the Potash Corporation of Saskatchewan (PotashCorp) wed Calgary’s Agrium, they worked hard to achieve real equality. But it did not come quick.

Canada’s two biggest fertiliser businesses merged to form Nutrien, the largest integrated global crop nutrient company in the world. The all-stock agreed deal was announced in September 2016, but it would be another 16 months before it closed in January 2018.

The merger offered various synergies and was strategically complementary. PotashCorp was a major supplier of potash and other fertilising minerals, while Agrium was a leader in nitrogen products with a strong retail network. The deal promised up to $5bn in value creation from synergies, implying perhaps a 20% upside to equity value. Both management teams promised their shareholders proportionate participation in any synergies and value creation.

Accepting it would be difficult to structure and execute, the companies negotiated in the spirit of a true merger of equals. PotashCorp shareholders ended up with 52% of the new company and Agrium shareholders 48%, but the share exchange ratio was structured so that neither company was the structural acquirer.

Governance and management was equitably split. Agrium’s CEO became CEO of Nutrien, but its registered office is in Saskatoon, PotashCorp’s home town. 

The deal had to work its way through what one observer called “a Byzantine series of shareholder and regulatory approvals”. One hold-up came from the Competition Commission of India, which ordered the divestment of certain minority shareholdings.

Other regulatory approvals came from the likes of China, Brazil and Russia before the merger, and the Nutrien name, finally became official at the start of 2018.


WINNER: Oi’s $20bn restructure 

Adviser to bondholders: Moelis & Co

In what was claimed to be the biggest ever restructuring in Latin America, a $20bn restructuring plan for Oi, the troubled Brazilian telecoms operator, was approved by almost 100% of creditors.

Failure to keep up with an evolving market, a disruptive merger and senior management changes had created a spiralling debt issue at Oi. In the second quarter of 2016, the company began talks with creditors in an attempt to restructure its $20bn debt. Moelis was instrumental in putting together the initial ad hoc group (AHG) of bondholders. The AHG quickly agreed a plan with Oi’s management, but the board refused to accept it, because it would have cut shareholders’ stakes dramatically.

Oi’s CEO resigned and was replaced, and Oi filed for bankruptcy. Apart from management and the bondholders, stakeholders now included state-owned banks, telecoms regulator Anatel (also a significant creditor and the only hold-out in approving the eventual restructuring), the Brazilian government (keen on a rapid solution) and, finally, the Oi board and shareholders. Importantly, a Brazilian activist investor had acquired an equity stake, increasing his influence over the board.

In Brazil, only the company can present its restructuring plan in court. Oi’s first plan of reorganisation was filed in September 2016. It preserved equity interests at the expense of creditors, who rejected it. This equity/debt and board/management stand-off continued until November 2017, when the new CEO resigned, citing death threats from unidentified third parties. 

The judge finally broke the logjam by empowering Oi’s general counsel to take charge of the process and present a plan to the court regardless of the board’s approval. Creditors will receive up to 75% of Oi’s equity, in return for a capital injection of $1.2bn. Brazil now plans changes to its bankruptcy laws.

Securitisation and structured finance 

WINNER: Pacific Alliance’s $1.36bn catastrophe bond 

Bookrunner: Citi

The International Bank for Reconstruction and Development (IBRD) has pushed the boundaries of the catastrophe (cat) bond market by issuing the largest sovereign risk transaction ever seen. Its $1.36bn capital at risk (CaR) notes will provide earthquake protection for Chile, Colombia, Mexico and Peru, all members of the Pacific Alliance.

This was the first cat bond transaction for three of the parties – Chile, Colombia and Peru. Investors were keen to take on the risk. The transaction attracted $2.5bn of demand from more than 45 investors, allowing the deal to be increased from an original size of $1bn to $1.36bn. That is all the more impressive given that 2017 was a terrible year for catastrophe loss, not least in Mexico. The country’s most recent catastrophe bond was triggered by an earthquake off the southern state of Chiapas, and paid out $150m.

Nonetheless, each of the five tranches, including a class A and class B for Mexico, was upsized and priced under the low end of initial guidance. The pricing was three-month US dollar Libor, minus a 0.2% funding margin, plus an individual risk margin or premium for each tranche. The Chile tranche, which started at $300m, grew to $500m, paying a 2.5% premium. For Colombia, $300m grew to $400m with a 3% premium. Mexico A grew from $140m to $160m, priced at a 2.5% premium. Mexico B went from $85m to $100m, with a 8.25% premium. And Peru’s tranche grew from $175m to $200m, paying a premium of 6%.

The notes for Chile, Colombia and Peru have a three-year term, with two years for Mexico. The triggers are parametric and depend on data provided by the US Geological Survey. The deal is the biggest ever IBRD CaR notes transaction, the biggest earthquake cat bond and the biggest parametric cat bond.


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