Deals of the year logo 2022

The Banker reviews the best deals of the past year in the Americas. 

Bonds: Corporate  

Verizon’s $31bn multi-tranche jumbo bond offering

Bookrunners: Bank of America, Barclays, BNP Paribas, Citi, Credit Suisse, Deutsche Bank, Goldman Sachs, JPMorgan, Loop Capital Markets, Mizuho, Morgan Stanley, MUFG, RBC Capital Markets, Santander, and TD Securities

Co-managers: Academy Securities, AmeriVet Securities, Bancroft Capital, Cabrera Capital Markets, CastleOak Securities, PNC Bank, R Seelaus & Co, Samuel A Ramirez & Co, Scotiabank, Siebert Williams Shank & Co, Société Générale, Sumitomo Mitsui Financial

Group, and US Bancorp 

Verizon, the US telecommunications conglomerate, is no stranger to jumbo deals. It set a record for the largest-ever corporate debt offering in 2013, with a mega $49bn deal to fund the $130bn buyout of its wireless unit.

This transaction was not quite as big, but still impressive at an eye-watering $31bn. The issuance was raised across five markets over seven days during March 2021 to fund the purchase of 5G spectrum licences, which it won in a US government auction with a bid of $45.5bn. The bid was almost twice as big as the next biggest bidder from AT&T Spectrum Frontiers, who bid $23bn.The licences enable the use of airwaves that are ideal for 5G.

The debt financing comprised a $25bn offering plus bonds in euros, Australian dollars, Canadian dollars and Swiss francs, which amounted to the equivalent of $31bn.

The nine-tranche $25bn part was the largest transaction in the investment-grade sector in 2021 and the sixth-largest on record. Demand was strong, peaking at multiple times the issue value and enabling significant price-tightening.

Meanwhile, the CHF700m ($743m) tranche reopened the Swiss franc market for US corporate issuers after a three-year hiatus. It was also the largest corporate bond in the Swiss franc market in over two years.

Bonds: Sovereign, supranational and agency  

International Finance Corporation’s $2bn bond

Joint lead managers: BNP Paribas, JPMorgan, Nomura, and TD Securities 

The International Finance Corporation (IFC) has been at the forefront in the post-London inter-bank offered rate (Libor) transition. Since February 2021, for example, it has swapped all of its fixed rate issuances into secured overnight financing rate (SOFR).

This deal, issued at the end of August 2021, was another important step in the transition away from the use of Libor in the bond markets, with the IFC becoming the first borrower to price a fixed rate dollar benchmark in reference to SOFR mid-swaps rather than Libor mid-swaps, with the latter having historically been the convention for pricing sovereign, supranational and agency bonds.

The $2bn five-year deal generated plenty of interest from investors, with the final order book hitting $3.5bn, enabling the bond to price at the tightest level for a comparable five-year US dollar supranational benchmark in the year, to date. Several public-sector borrowers have since followed the IFC’s lead in pricing fixed-rate dollar benchmarks versus SOFR mid-swaps as the bond market prepares for the cessation of Libor by the end of June 2023.

Equities  

Rivian’s $13.7bn IPO

Lead managers: Allen & Co, Bank of America, Barclays, Deutsche Bank, Goldman Sachs, JPMorgan, Morgan Stanley, and Wells Fargo 

Co-managers: Academy Securities, Baird, Blaylock Van, Cabrera Capital Markets, King & Associates, Loop Capital Markets, Nomura, Piper Sandler, Ramirez & Co, RBC Capital Markets, Siebert Williams Shank, Tigress Financial Partners, and Wedbush Securities 

In November 2021, electric vehicle (EV) manufacturer Rivian launched one of the most hotly anticipated initial public offerings (IPOs) of 2021. Ahead of its IPO, the company, which is focused on the truck and SUV end of the EV market, had approximately 55,400 pre-orders from customers across the US and Canada, as well as a deal with Amazon to supply 100,000 delivery vehicles. At deal launch, the company registered to sell up to 135 million shares, with pricing offered at $57–62 per share. 

But such was the demand, including a group of existing investors such as Amazon, Franklin Templeton and Blackstone indicating an interest in buying up to $5bn of shares in the offering, that Rivian was able to upsize the deal to 153 million shares. It also revised the pricing range to $72–74, although the deal ultimately priced at $78 per share. It raised $11.9bn through its listing on Nasdaq, with Rivian subsequently raising a further 22.95 million shares via the greenshoe to reach a total of $13.7bn. This made it the fifth-largest US IPO on record and the largest since 2014.

The company’s share price initially surged in the wake of the IPO, although it has since struggled, with wider market conditions becoming more challenging, as well as the company struggling with production targets and increased supply chain costs.

Nonetheless, the deal represented a watershed transaction across several emerging megatrends, including mobility technology, energy transition and e-commerce fulfilment. 

Financial institutions group financing  

Banco do Brasil’s $500m social bond 

Joint bookrunners: Crédit Agricole, Credit Suisse, Itaú BBA, Morgan Stanley, UBS, and Sumitomo Mitsui  

In January 2022, state-owned Banco do Brasil launched the first social bond from a financial institution in Latin America. Proceeds from the seven-year $500m bond will be used to finance social projects, such as affordable housing, small and medium-sized enterprise finance and microfinance, socio-economic advancement and access to essential services. 

This bond highlights the importance of the relationships between Brazil’s development-focused banks and multilateral organisations. Banco do Brasil’s social bond was supported by the Inter-American Development Bank, which helped come up with the sustainable finance framework. 

Despite some market volatility at the time of issuance, the deal was significantly oversubscribed and was able to price with a coupon of 4.875%, slightly lower than initial price talk.

Infrastructure and project finance   

Autopista Río Magdalena toll road $740m project financing

Bookrunners: Banco de Crédito del Peru, Bancolombia, CAF-AM Ashmore Debt Fund, Crédit Agricole, Financiera de Desarrollo Nacional, Goldman Sachs, Santander, Siemens Financial Services, and Sumitomo Mitsui 

Launched in 2014, Colombia’s ‘fourth-generation’ toll road project has become the largest and longest-running infrastructure investment initiative in the country’s history. By 2020, more than 29 projects to construct or improve 5000km of the country’s roads had been financed at a cost of around $13bn. The construction of the Autopista Río Magdalena toll road represents the single largest fourth-generation project financing to date, securing $740m from a 144A/RegS Notes issuance and a triple-tranche multi-currency loan. 

The project represents the final component of a series of projects designed to streamline the interconnection of Medellín, Colombia’s second-largest city, to the rest of the country. It consists of the construction of approximately 85km of new highways and the renovation of 58km of existing roads. 

The financing was structured as a multi-currency loan and bond hybrid format to mirror the asset’s long-term revenue profile and allow for optimised rates from both local and international lenders. Despite the sector volatility that has often permeated Latin American infrastructure projects, the transaction generated tight pricing and attracted a diverse group of reputable international and local creditors. The 144A/RegS Notes issued by Goldman Sachs for 915bn pesos ($243m) received a BBB– and Baa3 rating by Fitch and Moody’s, respectively. 

The first financing tranche includes an 825bn pesos loan tied to individuals, partnerships and corporate creditors. Bancolombia sponsored 76% of the amount in units of real value for 275bn pesos for the second tranche. The third tranche consists of a 15-year syndicated loan for $200m from Banco Santander. 

Leveraged finance  

$18bn financing package for the leveraged buyout of Medline 

Bond and loan bookrunners: Bank of America, Barclays, BMO Capital Markets, BNP Paribas, Citi, Credit Suisse, Deutsche Bank, Goldman Sachs, HSBC, ING, Jefferies, JPMorgan, Macquarie, Mizuho, Morgan Stanley, MUFG, Nomura, RBC Capital Markets, Santander, Scotiabank, Société Générale, Sumitomo Mitsui, TD Securities, Truist, UBS, and Wells Fargo 

Bond bookrunners: Blackstone and Carlyle 

Medline is the US’s largest private manufacturer and distributor of healthcare supplies to hospitals, doctor’s offices and health centres. It was founded in 1966 by the Mills family and had been privately owned by the family for the majority of the time since then, excepting a five-year period in the 1970s when the company was publicly listed.

On June 5, 2021, private equity groups Blackstone, Carlyle Group and Hellman & Friedman announced that they had entered into a definitive agreement to acquire majority ownership in Medline Industries, in a deal valuing the company at around $34bn.

In September 2021, a jumbo financing package comprising of $7.3bn term loan B, Ä435m term loan B, $4.5bn senior secured notes, $2.5bn senior unsecured notes, a $2.2bn commercial mortgage-backed security bridge facility, and a $1bn revolving credit facility was put together to fund the transaction. 

There was significant investor demand and material oversubscription across the structure, which enabled Medline to shift $1.5bn from senior unsecured notes into the US dollar term loan B and senior secured notes. The entirety of the circa $7.8bn of loans and $7bn of bonds were all priced at the tight end or inside of price talk. At $18bn, the debt financing was the largest leveraged buyout in more than a decade. 

Loans  

Ford’s $15.5bn sustainability linked revolving credit facilities 

Lead sustainability agent: Crédit Agricole Co-sustainability structuring agent: JPMorgan 

Bookrunners: Barclays, BNP Paribas, Bank of America, Bradesco BBI, Citi, Commerzbank, Crédit Agricole, Deutsche Bank, Goldman Sachs, JPMorgan, Lloyds Bank, Mizuho, Morgan Stanley, MUFG Loan Partners, RBC Capital Markets, Société Générale, and Sumitomo Mitsui 

In September 2021, car manufacturer Ford signed-up to a syndicated credit agreement worth $15.5bn, which was a trailblazer in two different ways. First, it marked a shift in reference rate from the London inter-bank offered rate to the secured overnight financing rate — the largest financing package linked to that reference rate at the time. 

The loan agreement also included ambitious sustainability key performance indicators (KPIs) — the hitting or missing of which could result in a step-down or step-up in interest rates, with a potentially significant financial impact for Ford given the size of the credit facility.

The chosen KPIs relate to the most material sustainability issues for Ford’s business, such as electrification and reducing carbon dioxide emissions. This is a highly significant transaction in the US market, from a major and well-regarded issuer, where at the time of the transaction less than 10% of loans had sustainability-linked features. 

Ford is the first US carmaker to link its bank financing to sustainability targets. In particular, Ford’s decision to include Scope-3 carbon emissions (indirect carbon emissions created via a company’s supply chain or its customers) was an ambitious move that is likely to set a positive precedent for other carmakers arranging similar facilities.

Ford followed on from its US transaction by implementing its sustainability-linked framework in a £690m revolving credit facility (RCF) and a Ä240m RCF in the UK and Germany in November 2021. 

M&A  

AstraZeneca’s $39bn acquisition of Alexion 

Lead financial advisers to AstraZeneca: Centerview Partners and Evercore

Financial advisers to AstraZeneca: JPMorgan, Morgan Stanley and Ondra Partners

Financial adviser to Alexion: Bank of America  

In July 2021, global pharma company, AstraZeneca, completed its acquisition of Alexion, a Boston-based pharma company specialising in rare diseases. The deal had been publicly announced in December 2020. The purchase, valuing Alexion at $39bn, was completed using cash and shares, with Alexion shareholders receiving $60 in cash and 2.1243 AstraZeneca American depositary shares for each Alexion share. At the time of the transaction, Alexion shareholders received 15% ownership in the combined company.

There were several significant challenges to be addressed to complete this large cross-border deal. For instance, some US institutional investors are restricted to owning US common stock, while the combined company would be listed in the UK, creating a post-deal sell-off period which needed to be managed. The Covid-19 outbreak also created a busy backdrop for the deal given AstraZeneca’s role in developing and supplying one of the world’s most-used vaccines. Vaccine development and rollout demanded significant amounts of senior management time and focus, and created volatility in AstraZeneca’s share price which had to be accounted for.

Following the transaction, AstraZeneca has been able to create a dedicated rare diseases business unit. The deal will also enable it to continue expanding its research and product development efforts in the field of immunology. Specifically, the company will be able to build on Alexion’s clinical pipeline of 11 molecules across more than 20 development programmes for treatment across rare diseases and more broadly. 

The acquisition is expected to support significant revenue growth, with the combined group targeting double-digit revenue growth up to 2025, and to improve the combined group’s profitability, including through $500m in annual synergies. The industry-transforming transaction represented the largest acquisition in the company’s history, in addition to being largest transaction involving a US target announced in 2020 and largest healthcare transaction globally in 2020. 

Restructuring  

Cinépolis’s $1.25bn restructuring 

Financial adviser to Cinépolis: Lazard 

Participant banks: Bancomext, Bank of America, Bank of China Mexico, Bank of China Panama, Bankia, Banorte, BBVA, BNP Paribas, HSBC, Santander, and Sumitomo Mitsui 

Mexico-based Cinépolis is the largest cinema chain in Latin America. Over the past decade, it borrowed heavily to fuel its aggressive expansion plans. By 2020 it was operating 862 cinemas across 17 countries, stretching from South America to the Middle East. 

The Covid-19 pandemic took a devastating toll on the cinema industry. Global theatrical revenue slumped from $42.3bn in 2019 to $12bn in 2020, according to figures from the Motion Picture Association. Unable to service its debt, which stood in excess of $1.25bn, Cinépolis hired financial advisory firm Lazard to lead discussions with its creditor banks, which included Bank of America, BBVA, HSBC, Santander and the Mexican government’s development bank, Bancomext. 

After Cinépolis’s controlling family offered to put up $100m of their own funds, the consortium of lenders agreed to inject $200m in new money to help the company recover from the pandemic and a deal was made to restructure the $1.25bn of existing syndicated and bilateral loans. 

The transaction was closed after six months of negotiations, equipping Cinépolis with the means to weather the pandemic-induced market shocks and, by 2022, resume the expansion of its theatres within its key markets. 

Securitisation   

Service Experts’ $337.4m inaugural ABS transaction 

Sole underwriter, structuring agent and bookrunner: Citi  

On November 19, 2021, Service Experts, a major North American heating, air conditioning, plumbing, repair and maintenance company, priced its inaugural asset-backed securitisation (ABS) transaction. The $337.4m SE 2021-1 issuance was backed by a pool of residential lease contracts, with the leases financing heating, ventilation and air conditioning (HVAC) units and water heater equipment, as well as related maintenance contracts.

It is the first-ever ABS transaction to be solely backed by HVAC and water heater equipment leases, and has opened a new asset class and market for ABS investment.

The deal was split across three classes of notes, with the most senior achieving a single-A rating from ratings agency Kroll. The deal successfully navigated a busy week for ABS, with 15 deals worth a total $9.2bn on the market during the week commencing November 15, as well as a challenging market backdrop with spreads widening in the weeks before the deal.

Extensive marketing efforts ahead of the deal led to impressive subscriptions for a debut issuance, with all three tranches multiple times oversubscribed, leading to price tightening across the structure.

Sustainable finance  

PSP Capital’s inaugural C$1bn green bond 

Joint lead and joint bookrunners: HSBC and RBC Capital Markets 

Co-managers: BMO Capital Markets, Casgrain & Co, CIBC World Markets, Laurentian Bank of Canada, Mouvement des caisses Desjardins, National Bank Financial, Scotiabank, and TD Securities 

PSP Capital is a wholly owned subsidiary of the Public Sector Pension (PSP) Investment Board, one of Canada’s largest public investment managers with more than C$200bn ($158.6bn) of net assets under management. On February 17, 2022, it launched its debut 10-year green bond, valued at C$1bn.

PSP Capital carefully monitored market conditions, choosing a window of stability to maximise investor interest in the deal. The general market backdrop was very challenging, with economic sentiment darkening early in the year and speculation growing about a likely Russian invasion of Ukraine. Such were the market conditions that serious consideration was given to the timing and how best to approach getting the deal done.

Marketing was conducted over a window on February 14–15 2022, with 12 of the 14 investors placing orders. The final order book comprised 49 investors, nine of which were new. 

Orders were well diversified across the globe, attracting more participation from Europe, the Middle East, Africa and Asia than any previous 10-year Canadian dollar issuance by PSP Capital. The perceived quality of the deal was such that despite the difficult backdrop, it was still able to achieve a ‘greenium’ of 4–5 basis points, pricing at a coupon of 2.6%. 

Outside of navigating difficult market conditions, the transaction was notable in several respects. As one of Canada’s largest public investment managers, the transaction has the potential to be a significant precedent-setting deal in terms of environmental, social and governance standards. PSP Capital’s green bond framework, published on February 14, received positive feedback from investors and a medium green rating from second-party opinion provider, Cicero.

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