Deals of the Year 2023 – Americas

Bonds: Corporates

General Motors’ inaugural green bond 

Bookrunners: Bank of America, Barclays, BNP Paribas, Citi, Crédit Agricole CIB, Goldman Sachs, JPMorgan, Morgan Stanley 

Co-sustainability agents: BNP Paribas, Crédit Agricole CIB

As one of the world’s largest automotive companies, General Motors’ (GM’s) launch of its inaugural green bond marks a significant milestone for the industry, as well as the sustainable finance market. The $2.25bn of investment-grade green bonds represent GM’s first capital markets activity to support its electric vehicle, and environmental, social and governance targets under the company’s new Sustainable Finance Framework.

The framework, launched in 2022, seeks to support what GM chief financial officer Paul Jacobson has called “a secular growth story driven by electric and autonomous vehicles that is changing the trajectory of our business”. It is designed to guide a wide range of potential financial deals by the company, including bond issues, securitisations, loans and retail deposits, to support eligible projects, assets and activities. The structure allows for both ‘green bonds’ and ‘social bonds’, with the latter aimed at achieving socioeconomic advancement and empowerment, including in supplier and dealer diversity, as well as in achieving a diverse and inclusive workforce.

The company’s first green bond is specifically targeted at funding “investments and expenditures for the design, development or manufacture of clean transportation technology and enabling solutions”. With a conducive market backdrop following a positive second-quarter earnings announcement, gross domestic product figures and Federal Open Market Committee meeting, in July 2022 GM announced a two-tranche benchmark transaction of seven-year and 10-year green notes. 

Despite several other issuers in the market, GM built a strong order book topping out at $7.3bn, allowing it to tighten spreads by 25 basis points, from Treasuries +295 and T+320 to T+270 and T+295 for the seven-year and 10-year tranches, respectively. The final deal saw $1bn of seven-year and $1.25bn of 10-year notes launched and priced, with more than 175 investors participating. Asset managers and insurance and pension investors accounted for 85% of the order book.

Bonds: Sovereigns, supras and agencies

Mexico’s $2.2bn debut SDG bond 

Bookrunners: BBVA, Goldman Sachs, JPMorgan, Natixis 

Mexico launched its first US dollar-denominated environmental, social and governance (ESG)-labelled bond in August 2022, following two successful euro issues in 2020 and 2021 and a local currency issue earlier in the year. The $2.2bn 10-year Sustainable Development Goals (SDG) bond offering was divided into $1.8bn of new money and up to $486m in switches.

In recent years, the Mexican government has worked to map its budget more closely to the UN-mandated SDGs. The proceeds will finance projects in 1345 municipalities with a combined population of 22 million in states in the south of the country. Geospatial eligibility criteria ensures expenditures are directed towards regions in which Mexico’s SDG gaps are the widest, whether due to educational, healthcare, infrastructure or standard of living issues. 

Criteria include reducing the proportion of over-15s who are illiterate; the percentage of children who do not attend school; the proportion of homes without running water; and the percentage of homes that lack electricity or basic household appliances. The ‘SDG localised finance’ strategy seeks to target the most disadvantaged areas and demographic groups, such as indigenous people, children and the elderly. Perhaps unsurprisingly, around 60% of the issue was allocated to ESG investors, and only 3% to investors with no track record of ESG investment.

Books closed with a final orderbook of more than $6.5bn, narrowing spreads over Treasuries through the process. The government set the deal size at $1.8bn, but followed with a cash tender offer for some outstanding bond series, allowing holders of certain notes to switch to the new bonds, resulting in the repurchase of around $486m of the principal amount of outstanding securities.

The book demand was heavily concentrated in funds (84%), followed by banks (6%), central banks and official institutions (5%), corporates (4%), and insurers and pension funds (1%). 

Equities

Eletrobras 33.7bn reais follow-on 

Lead co-ordinator: BTG Pactual

Global bookrunners: Bank of America, Goldman Sachs, Itaú BBA, XP

Joint bookrunners: Bradesco BBI, Caixa Econômica Federal, Citi, Credit Suisse, JPMorgan, Morgan Stanley, Safra

Financial adviser to Furnas: Bradesco BBI

The privatisation of Brazilian power utility Eletrobras through a 33.7bn reais ($6.86bn) follow-on public offer (FPO) was a stand-out deal of the year by any measure. It was one of the largest equity capital markets (ECM) deals worldwide in 2022, the largest ECM issuance in Latin America in 2022, and the fourth-largest utility and energy sector deal on record.

Eletrobras — officially Centrais Eletricas Brasileiras — is the largest energy company in Latin America, and the sale has been described by pundits as possibly “Brazil’s boldest privatisation move since the 1990s”. The privatisation process began in 2017, but has been mooted since the last decade of the past century, when the company was restructured in a wave of public sector reform that led to other state-owned enterprises being sold off.

The FPO diluted the Brazilian government’s share to 40%. The book had high quality of local and international investors. It was two-times oversubscribed, with 55% of demand from Brazil; 63% came from long-only investors and 37% from hedge funds. It garnered more than 250 high quality investors.

Eletrobras’s portfolio, which can generate 100% of its power from renewables (including 92% hydro, 1% solar and 1% wind power), has made it an environmental, social and governance (ESG) play for many investors, which has boosted the overall demand in the offering contributing to its absolute success.

The Brazilian government plans to use the proceeds to fund 22 new hydroelectric concessions to replace existing agreements, but the deal also reflects the desire of the government at the time — led by then president Jair Bolsonaro — to privatise more state-owned enterprises.

Financial institutions group financing  

ICE’s largest investment grade bond 

Bookrunners: Bank of America, BBVA, BMO Capital Markets, Citi, Credit Suisse, Fifth Third Securities, Goldman Sachs, Mizuho, MUFG, PNC Bank, Wells Fargo

Co-managers: BBVA, BMO Capital Markets, Fifth Third Securities, Mizuho, PNC Bank, Société Générale

Intercontinental Exchange (ICE) has been on a shopping spree of late, with acquisitions including Simplifile in 2019 and Ellie Mae the following year, as it looked to bolster its mortgage technology business. In May 2022 ICE, which owns the New York Stock Exchange, announced that it was acquiring housing finance software, data and analytics company Black Knight for $13.1bn. 

The deal was a combination of $10.5bn cash (80%) and $2.6bn stock (20%). At the time of the deal, ICE announced that it would fund the cash portion with a mix of bonds, commercial paper and short-term bank facilities.

Eight days after the Black Knight deal was announced, ICE launched its largest-ever investment grade bond issue, with $8bn of paper of various tenures, surpassing its previous record of $6.5bn in August 2020. Two tranches of $1.5bn, for 10 and 30 years, represented ICE’s largest offers of each maturity ever, while $1.25bn tranches for three and seven years are its largest-ever fixed offers for those periods. Additionally, the company offered $1.5bn of five-year and $1bn of 40-year paper. The $8bn issue thus gives ICE funding across the curve.

The offer proved popular, with the orderbook peaking at 3.5-times, with more than a dozen orders over $100m, and a few over $200m and $300m, with traditional asset managers to the fore and a slant towards the long end. The issue attracted 93 new investors to ICE credit, accounting for around $651m or 8% of the total. 

The strength of demand allowed ICE to tighten pricing by 20–25 basis points. The deal allows for special mandatory redemption of the three-year, five-year, seven-year, and 40-year notes should the Black Knight deal not be finalised; at the time of research, it was still awaiting final regulatory approval.

Infrastructure and project finance

PennDOT Major Bridges P3 project 

Financial adviser to Bridging Pennsylvania: Macquarie Capital

Lead underwriters: JPMorgan, Wells Fargo

Bridging Pennsylvania Developer is a consortium comprising of equity members Macquarie Infrastructure Developments (60%) and Shikun & Binui Concessions USA (40%).

Pennsylvania is a key battleground state in US politics, so in years like 2022 — when hotly contested mid-term elections were held — it attracts considerable national and international attention. Major projects can become subject to considerable debate and speculation, as was the case with the Pennsylvania Department of Transport (PennDOT) Major Bridges P3 project, a major public–private partnership (PPP, or P3 in the US) that has faced various political challenges, including in litigation and legislative changes. 

But PennDOT proved a strong public sponsor and champion to navigate these hurdles, together with private-sector players able to demonstrate their commitment to the project and the local communities. The sponsor consortium, Bridging Pennsylvania Partners, has strengthened local buy-in partly through subcontracting around 90% of the work — well above the 65% contractual minimum — to local Pennsylvania companies. Macquarie Capital has highlighted the project as a “great public–private partnership success” with a “model public sponsor in PennDOT”.

As a result, ‘Package One’ of the project, covering six bridges, secured a $2.3bn funding agreement in December 2022, the largest bundled bridge project ever delivered in the US under a PPP agreement. The deal encompasses the  design, construction, financing and life-cycle maintenance of six major interstate bridges and associated infrastructure improvements across Pennsylvania. It will allow PennDOT to replace the bridges before they incur major maintenance costs, or require weight restrictions or road closures to be imposed. The department has said that, without the deal, the costs would have delayed several other important projects. 

The package includes $1.8bn of tax-exempt private activity bonds, $200m of equity, $140m in mobilisation and milestone payments by PennDOT, and $150m in interest income. The deal moved from design and permitting work to obtaining final pricing and capital raising in just seven months, despite a two-month hiatus due to legal challenges.

High-yield and leveraged finance

Phoenix Tower’s purchase of WOM’s Chilean Towers 

Lead arranger and bookrunner: Scotiabank 

Senior mandated lead arrangers: Banco Santander, BNP Paribas, Crédit Agricole, ING Capital, Sumitomo Mitsui Banking Corporation  

The largest syndicated deal in Latin America in 2022, the $2bn transaction raised by Phoenix Tower International (PTI) to support its acquisition of WOM’s Chilean towers accounted for 30% of the year’s total syndicated deal volume in the media and telecoms sector.

The highly complex transaction involved multiple financial, strategic and political intricacies. It entailed structuring three borrowing entities in the US, Spain and Chile; syndicating 23 lenders across Latin America, the US, and Europe; and multi-tranche credit facilities covering all operations in North and South America. 

The senior secured facilities covered 14 jurisdictions in the Americas, and the deal as a whole was executed in an environment of some political and social uncertainty. A total 16 international banks and seven local and regional lenders participated, including Scotiabank, Banco Santander and BNP Paribas.

The funding deal was launched at the same time as PTI announced its $930m acquisition of WOM’s 3800 towers in Chile, and was initially announced as a $1bn transaction. However, strong demand meant that PTI was able to increase its target to $2bn. The debt is broken down into three structures, each with a five-year tenor. First, a $1.404bn term loan for acquisition funding, repayment of existing debt, and payment of fees and expenses. Second, a $540m delayed draw-term loan for future capital expenditure and acquisitions. And finally, a $56m revolving credit facility to fund working capital.

The transaction will enable PTI to continue its expansion. The fastest-growing tower company in the Americas, its portfolio has expanded from just 100 sites in 2014 to more than 17,400 in 19 countries in 2023. Following the deal, 84% of PTI’s structural tower cash flow  in the Americas will come from Latin America and 16% from the US; around 80% is denominated in US dollars.

Loans 

Celanese’s $11bn bridge facility 

Financial adviser to Celanese: Bank of America

Bookrunners: Bank of America, Citi, Deutsche Bank, Goldman Sachs, HSBC, JPMorgan, Morgan Stanley, MUFG, PNC Bank, Santander, Standard Chartered Bank, Sumitomo Mitsui Financial Group, TD Securities, UniCredit, US Bancorp

The largest-ever US dollar-denominated mergers and acquisitions-related bond transaction in the chemical sector – the second-largest of bond issue of any sort in the industry and the largest low-BBB transaction overall in 2022 — is Celanese’s $11bn deal to finance its acquisition of DuPont’s mobility and materials business. 

It was also the third-largest deal ever with a coupon-stop covenant — that is, a mechanism to increase interest rates if the issuer loses investment grade (IG) status, a measure that Celanese says underlines its commitment to retaining its IG rating.

The $11bn deal to acquire the DuPont business was announced in February 2022, following which both Moody’s and S&P downgraded Celanese to low BBB. The impact of this was exacerbated by heightened investor sensitivity, which pushed spread differentials for low BBB names to a high of 143 basis points. To assuage investor concerns prior to its bond issue, Celanese obtained a third rating, from Fitch, at BBB- with stable outlook, and implemented the coupon stop covenant. 

As the rate spread indicates, the market conditions that the issuer had to navigate were far from ideal. Growing fears of a global recession, aggressive rate hikes by the US Federal Reserve and European Central Bank, and concerns over inflation and geopolitics all increased market volatility. In total, 2022 had a record 45 ‘goose egg days’ when no bond market access was available, with eight in the month preceding the July Celanese transaction alone, including five consecutive days. Such was the volatility of the issuance environment that there was a one and a half week gap between marketing and execution of the transaction.

Investors were understanding of this approach, and 60-70% of bond allocations were to investors who had participated in the marketing efforts, which reached more than 150 potential clients.

M&A  

De-SPAC of Zanite 

Financial advisers to Eve Air Mobility: Bradesco BBI, Banco Itaú, Banco Santander 

Special purpose acquisition companies (SPACs), or ‘blank cheque’ vehicles set up to acquire other companies and take them public, have become a popular means of listing businesses in recent years. SPAC initial public offerings raised more than $160bn in the US alone in 2021, according to Standard & Poor’s, though this shrank to just $13.5bn in 2022, as investors shied away from the deals in a more difficult macroeconomic environment. 

The process by which SPACs merge with privately held companies to list the latter — effectively bringing the SPAC lifecycle to a close — is known as a ‘de-SPAC’. One of the most significant de-SPAC deals of 2022 saw Nasdaq-listed SPAC Zanite, which focuses on aviation and transport, merge with EVE Urban Air Mobility, a subsidiary of major aircraft manufacturer Embraer, which produces electric vertical take-off and landing (eVTOL) aircraft and related infrastructure. The transaction has led to Zanite changing its name to Eve Holding, listed on the NYSE.

The deal saw a total investment of $357m, with a $185m investment from Embraer, $25m from Zanite’s sponsor, and $147m from a consortium of financial and strategic investors including major aerospace companies such as BAE Systems, Rolls-Royce and Thales USA. 

The transaction was one of the first de-SPACing processes for urban air mobility companies, and provided a capital boost for a company that aims to play a leading role in accelerating the development of the industry globally, in partnership with Embraer. The backers also see the deal as having a positive environmental, social and governance impact, given the limited environmental impact of eVTOL vehicles and the contribution they can make to passenger transportation.

Given the nature of the deal (new technology with high growth characteristics and product still under development), one key obstacle was to attract high-quality investors for the capitalisation. This obstacle was overcome by attracting key strategic partners.

Restructuring  

Grupo Aeroméxico’s ‘debtor in possession’ financing structure  

Financial adviser to Grupo Aeroméxico: Rothschild & Co

The Covid-19 pandemic, with its related lockdowns and travel restrictions, had a huge impact on the global aviation sector. Airlines haemorrhaged $168bn in losses in 2020, according to McKinsey. Grupo Aeroméxico, Mexico’s flag-carrier, posted a net loss of $2.1bn that year, and has continued to feel the impact of the pandemic’s tailwinds, losing $198m in the first half of 2022. 

The need for financial and operational restructuring led the company voluntarily filing for bankruptcy protection under Chapter 11 of the US Bankruptcy Act in June 2020. Alongside this, it secured $1bn in a bespoke ‘debtor in possession’ financing structure to fortify its balance sheet and support the restructuring. 

The deal, for which Rothschild & Co was the sole financial adviser, included key pillars, such as concessions from the airline’s labour unions, restructuring its fleet and leases, and pursuing a range of cost savings and revenue enhancements. Aeroméxico also agreed to buy back a 49% stake in its loyalty programme, PLM. Notably, the restructuring deal was executed without any taxpayer or government funding.

Rothschild played a leading role in the restructuring programme, building consensus among investors and other key stakeholders including the government, regulators and labour unions around an exit plan. From May 2021, the bank contacted more than 125 capital providers to gauge interest in exit financing. The outcome was an exit plan that overcame significant litigation challenges and strong opposition from some claimholders; the vote in favour was clinched by a narrow margin.

In March 2022, Aeroméxico announced its exit from the Chapter 11 procedure under a deal valuing its equity at $2.6bn, and giving it an enterprise value of $5.4bn. The exit deal provided $720m in new equity capital from investors including Baupost, Silver Point and Oaktree. Aeroméxico also issued $762.5m of new first lien secured notes at cash interest of 8.5%, underlining investor confidence in the airline’s outlook. The $408m acquisition of the 49% stake in PLM held by investment fund Aimia was included in the funding package.

Securitisation

Bradesco’s $16m CRA issuance 

Bookrunner: Bradesco BBI 

A Certificado de Recebíveis do Agronegócio (CRA), or agribusiness receivables certificate, is a tax-exempt securitisation instrument used in Brazil’s debt capital markets to finance agribusiness. In March 2022, Bradesco BBI issued the first US dollar-denominated CRA on the Brazilian market, with a $16m issue designed to finance several soybean producers in the Brazilian Midwest, specifically for the acquisition of machinery and inputs for the harvest. 

Until 2021, it was not possible to issue CRAs in foreign currencies. As a substantial part of the Brazilian agribusiness sector buys and sells US dollar-denominated commodities, this effectively meant that CRAs issued would have a currency mismatch between the working currency of agricultural producers and the local currency-denominated interest income paid to investors. 

This created the need for expensive hedging structures to offset the mismatch. In September 2021, however, the law was changed following requests from agribusiness, allowing the securities to be denominated in foreign currency.

Bradesco was the exclusive bookrunner for the first US dollar CRA after the law was passed. The deal was structured as a five-year facility in two tranches, one senior and one junior. The senior tranche was acquired in its entirety by Bradesco clients, while the junior tranche was purchased by a family office in a private placement offering. 

As the security in question was new to the market, the issuer undertook a lengthy investor information process and engaged in several discussions with the regulator to ensure that underlying risks and benefits were fully understood by all parties.

Sustainable finance

Uruguay’s pioneering SLB structure  

Bookrunners: Crédit Agricole, HSBC, JPMorgan, Santander CIB 

Uruguay made history in October 2022 by issuing the world’s first-ever sovereign sustainability-linked bond (SLB) with a coupon step-down and step-up. The feature, commonly seen in sustainability-linked loans, had never before been employed in the bond market. 

The $1.5bn issue’s two-way coupon step structure that will see the coupon rise if environmental key performance indicators (KPIs) are not met, fall if the issuer overperforms KPIs, and remain on a par if targets are met. 

The Uruguayan government set two KPIs: a reduction in greenhouse gas emissions in proportion to gross domestic product; and the preservation of natural forests, which acts as a proxy for the country’s carbon capture capacity. The ‘step up’ would increase the coupon by 15 basis points (bps), while the ‘step down’ would reduce it by the same amount, giving a maximum of 30bps variance from the coupon of 5.75%.

The innovative structure springs from the Uruguayan Ministry of Finance’s desire to incorporate environmental, social and governance risk into credit risk calculations, and breaks new ground in linking financing structures to nationally determined contributions on climate change mitigation. 

Given the novelty of the SLB, the ministry’s debt management team and the four banks structuring the transaction put in substantial work engaging potential investors. This included no-name feedback, non-deal marketing to gauge investor preferences on the step-downs and deal marketing to ensure potential buyers understood the structure and its goals.

This approach proved successful, with a diversified orderbook of more than 180 high-quality accounts, including 40 unique investors new to Uruguayan sovereign issues. This enabled the issuer to set pricing at Treasuries +170 bps, 25bps below initial price talks. Remarkably, Uruguay did not pay a premium on incorporating the step-down mechanism, with the net interest cost of 15–20bps considerably below those of other BBB-rated sovereign issues in 2022.