The Deals of the Year 2016 winners from the Americas.

Bonds: Corporates 

WINNER: Pemex $5bn bond

Bookrunners: BBVA, Bank of America Merrill Lynch, JPMorgan, Grupo Santander

HIGHLY COMMENDED: Cablevision $3.8bn bond

Selling debt on an oil company when oil prices consistently disappoint even the more pessimistic analysts is a tough proposition. Selling $5bn-worth of it is tougher still. But the bookrunners on Mexican state-owned oil giant Pemex’s mammoth bond issuance managed to do just that. 

They were quick to act when oil prices began to stabilise around the $30 mark in late January 2016, which coincided with two other fortunate events: the Mexican government’s announcement that it may add capital to the company, and the US Federal Reserve’s decision not to raise interest rates, a measure announced the day before Pemex went to market.

The issue was too good to pass for investors starved of yield and in search of emerging market debt. The $5bn bond offering consisted of three tranches: $750m 5.5% notes due in 2019, $1.25bn 6.375% notes due in 2021 and $3bn 6.875% due in 2026.

Pemex and its banks made sure that investors had all necessary details about the issuer’s financing plans for the year and its overall corporate strategy through extensive communication efforts, including on execution day. As a result, the 10-year tranche received such high levels of demand that its interest spread was eventually tightened much more than the five-year tranche. Indeed, while in the discovery phase initial price expectations for the five-year tranche were between 6.625% and 6.75%, the final price did not move from the guidance of 6.375%. In the case of the 10-year tranche, the initial price of about 7.375% shrank to a guidance of 7% before falling further to the much more amenable 6.875%. 

The large value of the longer term notes – twice the five-year ones – and its highly oversubscribed book offer further indication of what an excellent job the issuer and its banks did to boost investor confidence.

US fund managers flocked to the deal and accounted for more than three-quarters of purchases across all three tranches.

Bonds: SSA 

WINNER: Province of Chubut $88.9m bond

Bookrunner: Puente 

Co-manager: Banco del Chubut

HIGHLY COMMENDED: Mexico €1.5bn bond, Jamaica $2bn bond

The Banker’s Deals of the Year competition aims to acknowledge financial products or services that have had a significant positive impact on clients’ operations, solved a difficult problem or have the potential to be repeated by others in the future. It often happens that such deals are very large, and done by clients that can count on big international banks’ resources. So when a deal such as the $88.9m bond for the Province of Chubut in Argentina by local investment bank Puente came along, it offered a refreshing alternative. Indeed, the deal is a rarity as sub-sovereigns hardly ever issue bonds in Argentina. 

The Province of Chubut’s objective was to access funding through debt capital markets in order to finance infrastructure projects in healthcare, education, public buildings and transportation. Puente had worked with the province in the three years prior to the bond and had assisted it in an initial issuance. The success of the dollar-denominated $88.9m notes confirms the validity of Chubut’s approach to fund raising and its ability to attract investors, even during a volatile economic environment. The transaction was priced in March 2015, during a presidential electoral year that could have seen the continuation of the protectionist policies of former president Cristina Fernández de Kirchner, which had resulted in a challenging macroeconomic landscape. Although investors were hopeful about the political outcome, there was much uncertainty in international markets about Argentina at the time. The bond coupon was priced at a relatively low 4.5% and half of the issuance was taken up by solid, long-term investors such as local pension funds. 

Thanks to the country’s new pro-markets government, other local administrations may feel inclined to emulate Chubut’s capital markets success. The bond was backed by oil royalties that the province transferred to a beneficiary structure managed by Deutsche Bank. 

Capital Raising 

WINNER: CPPIB $12.5bn financing for the acquisition of Antares

Adviser to CPPIB: Credit Suisse, Morgan Stanley

Global structuring and joint coordinator on credit facilities: Credit Suisse

Joint coordinator on credit facilities: Deutsche Bank

Canada Pension Plan Investment Board (CPPIB) was seeking to diversify its investment portfolio, and entering the US market through the acquisition of Antares from GE Capital looked like an excellent way to do this as it would have provided geographical diversification and a leading business in its field. 

Antares provides financing to small and medium-sized private equity-backed companies, a market also known as private equity sponsors or financial sponsors. There were some impediments, however. A lack of existing standalone funding at Antares required the creation of a capital structure of unusual scale and complexity for its type of business. Such structure provided financing for both the purchase of Antares’ origination platform and the Antares loan portfolio itself, which stood at about $13bn. So the acquisition of a firm facilitating leveraged buy-outs became a leverage buy-out in itself, as financing was raised on the back of the target’s business and poured into it. It resulted in the largest leveraged buy-out involving financial institutions at both ends in the US in 2015.

An innovative special purpose vehicle (SPV) was created to meet the specific financing needs of the loan portfolio, while the operating company and the fee-based business were financed through a more traditional senior secured revolving facility and senior secured term loan. Credit Suisse raised $9.3bn through the SPV financing and $3.2bn of senior secured financing – beyond the acquisition value of $12bn.

The deal also allowed GE to advance its exit plan from the financial sector through the sale of businesses owned by GE Capital. Credit Suisse demonstrated its ability to deliver complex transactions – the coordination between its mergers and acquisitions team dedicated to financial institutions clients, its leveraged finance team and its consumer and asset-backed finance teams was key. Furthermore, the bank built a complex deal structure and large syndication in about 10 weeks, limiting the uncertainty that a deal of this type could bring to both bidder and vendor.


WINNER: Telefônica Brasil 16.1bn reais follow-on

Global coordinators and bookrunners: Santander, Itaú BBA, Bank of America Merrill Lynch, Morgan Stanley 

Joint bookrunners: BTG Pactual, Goldman Sachs, Credit Suisse, JPMorgan, Bradesco, HSBC

As Brazil fell deeper and deeper into economic recession in 2015, Telefônica Brasil’s mammoth follow-on equity issuance gave investors a much-needed safe refuge. The issue was linked to another crucial deal for the company. Telefônica Brasil had purchased broadband provider GVT, reinforcing its broadband internet and fixed-line telephone operations with the new assets and bolstering its leading position in the Brazilian telecommunications market. 

Part of Spanish group Telefónica, Telefônica Brasil had allowed the group to widen its overseas reach though the acquisition, something other European firms were also trying to do. The deal made great sense as Brazil is the main arena for Telefónica’s business in Latin America, producing about half of the group’s revenue from the region.

But to succeed, the group needed fresh capital to fund part of the Ä4.66bn cash component of the total Ä7.2bn paid to GVT’s previous owner, France’s Vivendi. Telefônica Brasil easily raised 16.1bn reais ($5.5bn) in what became the largest Brazilian offering since 2011, and which included an international component too.

Of the total 364.8 million shares sold, including the 6.3 million underwritten by Telefônica’s banks, 79.7 million traded on the New York Stock Exchange in the form of American Depositary Shares, broadening the appeal of the offer. 

Existing shareholders had priority over Telefônica Brasil’s new capital while new investors, particularly long-term ones, seized the opportunity, resulting in an order book that was highly oversubscribed. Among them, Brazilian funds represented 45% of demand, with US investors just under that figure. European names accounted for 10% of new investors and other Latin Americans about 1%. All existing and new shareholders were rewarded with a strong post-sale share price performance.

Green Finance 

WINNER: 8point3 Energy Partners $420m IPO

Lead left bookrunner and structuring agent: Goldman Sachs 

Lead bookrunner and structuring agent: Citi 

Bookrunners: Crédit Agricole, Deutsche Bank, JPMorgan

When two business rivals join forces, markets tend to take notice. When, as a result, they create a unique financing strategy, the deal creates even more of a stir. SunPower and First Solar are two leading US solar energy companies, and together they created a joint special purpose vehicle, 8point3, to raise capital by attracting green energy investors to a highly specialised venture. 

The deal brings together the best of US solar energy market; SunPower is a leader in crystalline silicon solar technology while First Solar is renowned for its thin film modules – as an analyst looking at the deal put it, this is the equivalent of a Coca-Cola and Pepsi partnership in the retail market. The tax-efficient vehicle owns and operates solar energy generation projects by its two sponsors, and the $420m raised through its initial public offering (IPO) will be used to support such projects and fund future acquisitions. 

Aside from the market importance of the sponsors, the deal is noteworthy for other reasons too. While seeking financial backing through a growth-oriented holding has been used in the clean energy market before, what sets 8point3 apart is its careful governance and business structure. Having two sponsors rather than one keeps conflicts of interests in check. 8point3’s board is also packed with highly qualified professionals. On the business front, risks are contained by including only US assets in the company’s initial portfolio, thus eliminating any need for foreign exchange management, while sponsors’ returns are linked to the performance of projects that each of them contribute to – a strong incentive to support 8point3’s long-term growth. 

Investors rewarded this cautious set-up with an IPO price at the top of filing rage, with shares coming in at $21. Long-only buyers wiped up 57% of the offering. 

Infrastructure and Project Finance 

WINNER: Lima Metro Line 2 $1.15bn

Joint global coordinators and bookrunners: Citi, Morgan Stanley, Santander Investment 

Other joint bookrunners: Lynch, Pierce, Fenner & Smith, Banca IMI, BBVA Securities, Crédit Agricole Securities, Natixis Securities Americas, SG Americas Securities

HIGHLY COMMENDED: Mexico City International Airport Phase 2 $3bn financing, Waha $796m gas pipeline

Fast economic growth has been lifting many people out of poverty in Peru. But with growing economic opportunities come pressures on urban infrastructure as rising numbers of people commute to cities in search of work. This was the case in Lima, Peru’s capital of 9 million people, which was faced with the possibility of its transport network being overwhelmed. 

The development of Lima Metro Line 2 is aimed at resolving this issue and, by doing so, improving the lives of Peruvians moving across the metropolis. The journey time from Peru’s largest port and airport into Lima, for example, will be slashed to 45 minutes from the current two-hour bus ride, while the reach and quality of urban connections will also significantly expand. 

The financing package created for the project is also laudable and resulted in a groundbreaking international debt issuance. The $1.15bn bond issued under New York law was the largest Peruvian public-private partnership financing executed in international capital markets to date, the largest ever infrastructure bond from Peru and a testament to the success of a new financing mechanism introduced in the country. Called RPI-CAO, it allows the concessionaire to earn payment rights by submitting progress reports on the project construction. The rights are not considered sovereign debt, avoiding extra weight on Peru’s public finances. 

The confidence of international investors in this mechanism and in a project of this size – its total cost was $5.5bn – paves the way for similar financing on other much-needed large infrastructure developments in the country. The US, Latin American and European investors that flocked to the Lima Metro Line 2 bond certainly showed confidence in the structure and happily accepted a 5.875% coupon, well below the 6% price initially tested with the market.

Islamic Finance 

WINNER: International Finance Corporation $100m senior sukuk

Joint lead arrangers: Dubai Islamic Bank, HSBC, National Bank of Abu Dhabi, Standard Chartered

Islamic finance has become of particular interest as issuers around the world seeking to diversify their investor base. To the World Bank’s private sector arm, the International Finance Corporation (IFC), issuing sukuk, or sharia-compliant debt instruments, has additional meaning as proceeds can help support the agency’s work in certain developing countries. Indeed, the Washington, DC-based IFC has become a global force in supporting the growth of the private sector and private finance in emerging markets. By issuing sharia-compliant instruments, it can also help deepen the local capital markets, depending on where such products are listed. 

The $100m sukuk issued by the IFC in 2015 achieved all of this. Proceeds were used to finance the IFC’s activities in the Middle East and north Africa and, as the bond was issued on Nasdaq Dubai, it also strengthened the Islamic finance offering in the Gulf region. The deal is noteworthy for other reasons too. It had the tightest pricing for a dollar-denominated sukuk and it was the first amortising sukuk by a supranational issuer. This means that it will gradually repay the principle through the total duration of the issue, which is five years. In this case, payments will be of a size and regularity that will allow investors to be fully repaid on average – considering various payment sizes throughout the bond life – after 3.75 years, a favourable term. 

The deal was issued through a special purpose vehicle, IFC Sukuk Company, and with a wakala structure, by which one party acts as an agent managing assets for another, allowing returns to stem from investments in a portfolio of assets rather than in a specific, tangible one. The issuance also marks the IFC’s return to Islamic finance after its debut $100m five-year sukuk in 2009.

The deal gained a listing on the London Stock Exchange too. More than half of investors were Middle Eastern names, with banks representing three-quarters of total buyers.

Leveraged Finance 

WINNER: AMAG Pharmaceuticals $850m acquisition financing for Cord Blood Registry

Lead left arranger on the $350m senior secured term loan and lead left bookrunner on the $500m senior unsecured notes offering: Jefferies 

Joint financial advisers to AMAG in the acquisition of Cord Blood Registry: Jefferies; Deutsche Bank 

Joint bookrunner and joint lead arranger: Barclays

AMAG Pharmaceuticals has been busy over the past couple of years, securing not one but two acquisitions in the maternal health sector only a few months apart. It bought Lumara Health in a deal that completed in November 2014, and announced the purchase of Cord Blood Registry (CBR) soon after, in June last year. Such an aggressive expansion strategy needed an equally aggressive financing solution. 

With CBR, AMAG made strong inroads in its maternal health business as the firm is the world’s largest stem cell collection and storage company and houses more than 600,000 preserved umbilical cord blood and tissue stem cell units. With a consideration of $700m in cash, the deal did not come cheap. As a reference, AMAG had closed 2014 with total shareholder capital of about $460m. To their credit, AMAG’s banks smoothly and quickly raised the amount needed – and more – through two debt facilities. In just a week, the company issued $500m-worth of senior unsecured notes due in 2023 that were priced at the halfway point of the initial price range, at 7.875%. 

The issue size was increased from $450m because of investors’ interest. It also obtained a $350m senior secured term loan which, thanks again to strong investor demand, priced 25 basis points below initial price talk, at Libor plus 375 basis points. Furthermore, the loan redemption value was set close to par, at 99.75, and within the tight end of the initial 99 to 99.5 price talks. 

About 80% of AMAG’s existing lenders participated in the financing, a huge vote of confidence for its financing strategy. Thanks to this support, AMAG diversified its business and expanded in a key growth health market.


WINNER: Anthem $26.5bn acquisition financing for Cigna Corporation

Left lead arranger and joint bookrunner: Bank of America Merrill Lynch 

Lead arrangers and joint bookrunners: Credit Suisse, UBS

Anthem’s acquisition of Cigna Corporation is set to create the largest US health insurer by membership numbers and accelerate the industry’s consolidation in the country from five national players to three.  

Health insurers had been finding it tough to raise prices following new healthcare legislation in the US, while also dealing with rising expense claims for expensive medications – cancer drugs, for example, can cost each patient more than $100,000 a year. The $54.2bn acquisition is expected to generate approximately $2bn in synergies by the end of 2018. 

The deal makes great business sense, but it has also raised concerns about potential anticompetitive behaviour in markets where the larger group would hold a dominant position. And while the acquisition needs to address some important concerns before being considered a success (the deal had yet to receive approval when The Banker went to press), the loan put together to support it can already make such claim. Bank of America Merrill Lynch, Credit Suisse and UBS underwrote a mammoth $26.5bn senior unsecured bridge facility which provided Anthem with the liquidity to fund the transaction. The financing was the third largest ever US investment grade bridge facility, and it was successfully syndicated in less than six weeks to only 19 banks. 

Interestingly, a month after the facility was closed, the lenders committed further to Anthem and provided $2bn three-year and $2bn five-year unsecured term loans to reduce the bridge facility to $22.5bn. They also provided a $3.5bn five-year unsecured revolving credit facility. Pricing on all debt was tight, particularly when compared with similar recent transactions in the US healthcare market.


WINNER: Allergan hostile defence from Valeant and $70.5bn sale to Actavis

Financial advisers to Allergan: Bank of America Merrill Lynch, Goldman Sachs

Financial adviser to Actavis: JPMorgan 

HIGHLY COMMENDED: Iberdrola and UIL $14.7bn merger, Intel’s $16.7bn acquisition of Altera

As far as mega-deals go, Actavis’s takeover of Allergan, which completed in March 2015, was a spectacular one. Allergan, the US pharmaceutical company responsible for the Botox wrinkle treatment, had initially been the target of Canada-based Valeant Pharmaceuticals, which at the time focused on dermatology, aesthetics and eye care. 

In 2014, Valeant joined forces with hedge fund Pershing Square to launch an unsolicited bid for Allergan, but rather than an acquisition, such efforts only resulted in an epic corporate battle that ended up involving the courts. Valeant had developed a reputation as a voracious buyer with a patchy record when it comes to the R&D expenditure of its targets. On the other hand, Allergan was known for its strong focus on innovation and research. 

Allergan was determined not to fall under Valeant’s ownership and its financial advisers rose to the challenge. Bank of America Merrill Lynch and Goldman Sachs studied alternatives to the public, unsolicited offer that would maximise Allergan’s shareholder value. This included a sale to another buyer. Such efforts resulted in an offer by Actavis that represented a 76% premium to Allergan’s share price on the day before Pershing Square began accumulating Allergan shares. It also equalled to a 43% premium to Valeant’s first offer, a 19% premium to Valeant’s final offer and a 10% premium to Allergan’s closing share price on the day the deal was agreed, in mid-November 2014. Four months later it completed. Furthermore, Actavis’s share price rose by about 26% from announcement to close day. 

Both companies’ boards and shareholders welcomed the transaction, which created a diversified, global pharmaceutical group. The larger entity, renamed Allergan, has a leading franchise not only in aesthetics and dermatology but also in eye care, neurosciences, women’s health and other specialties.


WINNER: Indiana Toll Road $6bn restructuring

Adviser to a group of debtor: Houlihan Lokey

Adviser to ITR Concession Company: Moelis & Company

HIGHLY COMMENDED: Lightsquare $4.2bn restructuring, NII $6bn restructuring

After failed, protracted restructuring attempts that resulted in a Chapter 11 filing, Indiana Toll Road is finally solvent again, and this is in no small part down to the great work conducted by Houlihan Lokey, which helped to resolve a situation that seemed impossible. 

After two years of frustrating back and forths between debtors, the infrastructure’s operator, ITR Concession Company, and the company’s sponsors, ITR, filed for Chapter 11 bankruptcy protection. This deterioration came following a financing agreement at the time of the concession, in 2006. ITR’s sponsors, Cintra and Macquarie, had secured the exclusive right to operate, manage and rehabilitate the Indiana Toll Road in exchange of a one-off $3.8bn rent payment. This was funded through $748m of the sponsors’ own capital and a $3.25bn loan due in 2015 and which required ITR to enter into a 20-year fixed-for-floating interest rate swap. The swap had ITR paying fixed rates while receiving six-month Libor rates. 

Those fixed rates had an escalating structure and both fixed and Libor rates were calculated on escalating nominal amounts. As Libor rates crashed in the aftermath of the financial crisis, ITR was no longer able to pay its creditors. Early attempts to restructure the company’s debt were unsuccessful, not least because of the introduction of hedge funds into the company’s debt, who entered after the initial discussions, and who were not prepared to accept the proposed restructuring terms. 

After these failed attempts, Houlihan Lokey was brought in by the group of debtors that had claims on $6bn-worth of secured loans. It created a plan that received unanimous support from the sponsors and the vast majority of senior creditors and which prescribed either a sale or a third-party financing to cover part of the defaulted debt plus shares in the restructured company. 

With a plan clearly laid out, finding a buyer did not prove too hard. Australian pension fund IFM Investors bought ITR at the end of May 2015, about a year after Houlihan Lokey began work on the deal – half the time previously spent on the initial restructuring talks – and provided a 95% recovery on the principle to its clients.

Securitisation and Structured Finance 

WINNER: PayPal $710m sale of an 85% participation interest in credit receivables

Financial adviser: Bank of America Merrill Lynch 

HIGHLY COMMENDED: Conn $1.12bn consumer loan asset-backed notes

PayPal Credit allows merchants to offer credit at the point of sale for online and mobile transactions and has become an increasingly important part of payments network PayPal. The firm is able to provide credit thanks to an arrangement with Comenity Capital Bank, by which the company buys the receivables related to PayPal Credit accounts while the bank retains ownership of the consumer credit accounts and purchases a participation interest in the receivables pool back from PayPal. 

But as PayPal Credit grows, so does the group’s balance sheet credit risk. The firm decided to look for strategic investors, but despite the growth prospects of the consumer credit division, the task was far from simple. PayPal needed to sell a large 85% in participating interest to the receivables pool, and investors would have to commit to funding the future growth of PayPal Credit but allow Comenity Capital Bank to retain control of credit origination, pricing and other policies. Furthermore, the deal had to follow a specific time frame as it had to fit around PayPal’s separation from eBay, the online platform it originated from and, because of the nature of the consumer credit business, investors would have to build daily cash management functions that were closely integrated with PayPal. 

The smart solution put together by Bank of America Merrill Lynch met all such requirements. It provided a $425m bridge financing for the purchase, securitised the receivables pool, and provided a $280m revolving loan to support the structure of the securitisation vehicle. The financing nearly matched the sale value. 

The deal marks the first credit card securitisation since the financial crisis where the seller retains control of certain features, the first securitisation of a participating interest and the first case in similar deals where portfolio balances are allowed to fluctuate.


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