Deals of the Year 2020 - Americas

Corporate bonds 

Winner: Bristol Myers

Squibb’s $19bn nine-tranche issuance

Active bookrunners: Barclays, Credit Suisse, Morgan Stanley, Wells Fargo

Pharmaceutical giant Bristol Myers Squibb (BMS) set corporate bond markets alight in May 2019 with a mega $19bn issuance. Proceeds from the jumbo offering contributed towards its acquisition of rival US pharma firm Celgene, which was announced in January 2019 and completed in November 2019 at a cost of $74bn. The merger, which took place after BMS overcame a number of regulatory hurdles and opposition from some of its own shareholders, has positioned BMS as one of the world’s largest pharmaceutical companies, with particular strengths in areas such as oncology and immunology.  

BMS issued seven tranches of fixed-rate bonds with three-, five-, seven-, 10-, 20- and 30-year tenors, and two floating rate note offerings at one-and-a-half and three years. BMS managed to navigate choppy market conditions in getting the deal over the line, with US-China trade relations at a particularly strained point in the days ahead of the transaction. 

Despite the huge size of the offering and the market disruption there was strong demand, with the order book several times oversubscribed. Given this demand, BMS was able to tighten its pricing average across the curve. Overall, the weighted average transaction coupon was 3.39% for a weighted average maturity of 12.8 years. 

At the time of pricing, the deal was one of the largest investment-grade bond offerings of 2019, the second largest bond offering ever in the healthcare sector, and ranked the 10th largest corporate bond offering in any sector, of all time.

Equities 

Winner: CPFL’s 3.7bn reais re-IPO

Bookrunners: Santander, Itaú BBA, Bradesco, BTG Pactual, Morgan Stanley

CPFL Energia group is Brazil’s second largest non-state-owned energy generator and its third biggest electricity utility, and it has aspirations to be even bigger. Following its re-initial public offering (IPO) in June 2019, which saw it offer 117 million shares, CEO Gustavo Estrella commented in the press that it was entering a new phase where it could focus on growth. 

State Grid Corporation of China, the world’s largest utility company by revenue, has held majority ownership in CPFL since January 2017 and bought out minority shareholders in November 2017. Prior to CPFL’s re-IPO, only about 5% of the company’s stock was available on Brazil’s B3 stock exchange. B3 requires all companies that it lists to have at least 15% of their shares available on the public market and CPFL had until October 31, 2019 to comply with the rule. 

In June 2019, the company sold 3.7bn reais-worth ($707m) of shares, at a price of 27.50 reais each. The issuance was worth about 12% of the company’s total market capitalisation, and the move was considered a re-IPO due to the low liquidity of its shares prior to this. There was strong investor demand, with a 3.9 times oversubscription for the shares. 

The offering was the first ever equity capital markets transaction of a state-owned Chinese company outside of Asia and the largest utilities-related equities transaction in Brazil’s history. The proceeds will be used by CPFL Energia to buy out the stake of parent group State Grid, in CPFL Renováveis, CPFL’s renewable energy arm, transforming it into a wholly owned subsidiary. The company plans to use Renováveis as an investment vehicle for further growth, including potential acquisitions. 

Financial institutions group financing 

Winner: Massachusetts

Mutual Life Insurance

Company’s $800m surplus notes-backed pre-caps issuance

Sole structuring adviser: Credit Suisse

In February 2019, Massachusetts Mutual Life Insurance Company (MassMutual) issued $800m-worth of pre-capitalised trust securities (P-caps) backed by surplus notes. P-caps are a capital markets alternative to revolving credit facilities. Both remain off balance sheet until drawn and can be repaid without penalty, but typically credit facilities offered by banks will only last for up to five years, whereas P-caps can go out for much longer – 30 years in this case. A major advantage of P-caps is that they allow a company ready access to capital at a favourable rate, locked in at the time the facility was created, no matter what the market conditions at the time capital is accessed.  

MassMutual’s P-caps are the first example of the securities being backed by a surplus notes issuance – surplus notes are bond-like securities issued by US insurance companies, but due to their highly subordinated position they are akin to equity in the event of a firm defaulting. 

The P-caps were structured as 30-year bullet fixed-rate securities, with the proceeds used by Harborwalk Funding Trust (a special purpose entity) to purchase a portfolio of US Treasury securities. The facility provides MassMutual with the ability to issue up to $800m-worth of 50-year non-call 30-year surplus notes with a 5.08% coupon, and requires the trust to purchase these surplus notes in exchange for some or all of the US Treasury securities. This provides MassMutual with a ready source of liquidity should it need it.  

MassMutual took advantage of a constructive market backdrop to announce the offering on February 28, immediately after releasing its full-year 2018 results after conducting a roadshow over the previous two days that reached 75 US investors. 

The arrangement has provided MassMutual with its largest ever contingent liquidity facility.

Green finance  

Winner: Chile’s $1.4bn inaugral green bond issuance

Bookrunners: BNP Paribas, Citi, HSBC

Green finance enjoyed a landmark year in 2019, with green bond issuance hitting a global record of more than $200bn. Chile made its own contribution to this trend by issuing a $1.4bn, 30-year sovereign green bond in June 2019. Not only was this a first for the country but also the first sovereign green bond in South America.

Chile has been a leading voice in the international climate change debate, both regionally and globally. Shortly before the green bond issuance, the government published its climate change action plan, which aims for the closure of all coal power stations by 2040 and a carbon-neutral economy by 2050. The bond proceeds will go towards projects in areas such as clean transportation, energy-efficiency improvements and sustainable management of water resources. 

The sovereign embarked on an ambitious marketing exercise targeting investors in the US, Europe and Asia ahead of this issuance. Additionally, to boost take up of the bond, it launched a concurrent switch tender allowing bond holders with a basket of seven upcoming maturities (dated between 2020 and 2047) to trade in their existing bond holding in exchange for an equivalent investment in the green bond. Those investors who pledged to tender their notes and reinvest in the new issuance received priority allocation.

There was huge demand for the bond, with orders peaking at more than 13 times the offer size and interest from more than 260 investors. It also achieved impressive pricing with a 3.53% coupon, which compares very favourably with its most recent 30-year issuance in 2017, printed with a 3.869% coupon. 

Chile did not rest on its laurels for long; just over a week later it printed its first euro-denominated green bond, raising Ä861m. And it has continued to burnish its green credentials in 2020, by issuing further tranches of both dollar- and euro-denominated green bonds in January.

High-yield and leveraged finance 

Winner: Financing for Dun & Bradstreet’s $7.2bn leveraged buyout

Bookrunners: Bank of America, Citi, RBC Capital Markets

In an era when big data drives business, the extensive commercial data and insights of analytics firm Dun & Bradstreet (D&B) are a valuable commodity for companies across a range of sectors such as communications, technology and financial services. The company is best known for its business database containing more than 300 million records. Though operating at the heart of the modern data revolution, the firm has been in the data business since it was founded in 1841.

In August 2018, D&B entered into a definitive agreement to be acquired by a consortium led by CC Capital Partners, Cannae Holdings and Thomas H Lee Partners. The acquisition caught the eye of Black Knight, a data and analytics firm operating in the mortgages and real estate space, and in November 2018 its board of directors approved an investment of up to $375m in the transaction. Black Knight chief executive Anthony Jabbour would also take on the additional role of CEO of D&B.

The acquisition was to be the first all new money leveraged buyout since 2018, with a financing package worth $4.58bn put together to support the deal. It was a multi-layered package comprising a $2.53bn tranche of term loan B, $750m senior unsecured notes, $700m secured notes, a $400m revolving credit facility and a $200m repatriation facility. 

Ahead of the book launch, the secured notes tranche was added to the package to take account of loan market volatility at the time and to drive tension in the book-building process, and allowing the term loan to be reduced in size. The secured notes tranche started at $500m, but following heavy subscription it was possible to upsize it by $200m in market, with tightened pricing.

Infrastructure and project finance 

Winner: Concessionaire Metro de Lima Linea 2’s $150m revolving credit facility

Lead arrangers: Banco Sabadell, BBVA, Santander 

As Peru’s economy grows, migration from rural areas is increasing the population of the country’s cities by about 1.6% a year. Investment in urban transport infrastructure is key to making the country’s rapid urbanisation sustainable and it has become a priority for the government of Peru. 

The $5.8bn Lima Metro Line 2 project forms part of an urban transportation system that will run throughout the Lima-Callao Metropolitan Area and help ease congestion in Lima, Peru’s capital of more than 9 million people. It will be the first underground metro system in the country and it is expected to serve 660,000 passengers per day, once the project is fully operational at the end of 2021. 

In addition to cash payments and to minimise construction risks, Peru employs a project finance mechanism called RPI-CAOs. These are government-backed payment certificates that represent the payment obligations of the Peruvian government and are linked to project milestones. For the Line 2 project, RPI-CAO makes 60 quarterly payments available for a period of 15 years to the project concessionaires upon their achievement of defined milestones. The RPI-CAO is transferable and can be auctioned by the project company in international capital markets as bonds.  

The cash payments/RPI-CAO formula addresses the long-term risk inherent with financing a large-scale project, but leaves a substantial gap in terms of effectively financing the short-term working capital needs of the concessionaire. In September 2019, Concessionaire Metro de Lima Linea 2, comprising of Iridium (25%), FCC (18.25%), Salini Impregilo (18.25%), Hitachi (11.6%), Hitachi STS (16.9%) and Cosapi (10%), entered into an agreement with BBVA Peru, Banco de Sabadell and Banco Santander for a $150m two-year revolving credit facility. The facility will finance the gap between construction payments and cash payments/RPI-CAOs issuance, with a 3% to 4% margin. 

Loans 

Winner: Occidental Petroleum’s jumbo financing package for the acquisition of Anadarko Petroleum

Joint lead arrangers and bookrunners: Bank of America, Citi

In May 2019, Occidental Petroleum entered a definitive agreement to acquire Anadarko Petroleum for $57bn, in what would be the largest North American energy acquisition in 20 years. 

The acquisition followed a heated bidding war between Occidental and oil behemoth Chevron. In April, Chevron had entered into an agreement to purchase Anadarko for $50bn, but following an improved offer from Occidental (which had made a bid two weeks earlier), Anadarko terminated that agreement. Occidental was able to up its offer following a pledge from Warren Buffett’s Berkshire Hathaway to invest $10bn of his company’s capital to finance the cash portion of the deal, marking a rare investment into shale production for Berkshire Hathaway.

Prior to the transaction announcement, Citi and Bank of America provided Occidental with a $21.8bn underwritten bridge loan facility to enable it to strengthen the credibility of its offer. The 364-day senior unsecured bridge provided Occidental with committed financing to fund the transaction, in the event that capital markets conditions were unfavourable, and gave it flexibility as it negotiated terms for the deal. 

The $21.8bn package was syndicated after the announcement, with $13bn as a capital markets bridge loan facility and $8.8bn as a term loan bridge. It was the largest North American energy bridge facility on record.

The term loan bridge was to cover a $4.4bn, 364-day tranche and a $4.4bn two-year tranche of term loans, which was closed in June. In connection with the transaction, Occidental had agreed with French oil company Total that if successful in the acquisition, it would sell Anadarko’s $8.8bn African-based assets to Total, and the proceeds from this transaction were expected to cover the term loans. The capital markets bridge facility was terminated by a $13bn senior notes issuance in August, the day before the acquisition was completed. In addition, the debt package also included a $2bn increase to the company’s existing $3bn multi-year revolving credit facility.

M&A 

Winner: Natura’s $3.7bn acquisition of Avon

Lead financial adviser to Natura & Co: UBS

Natura & Co’s $3.7bn merger with Avon, completed in January 2020, was a major moment for the global beauty industry, creating the world’s fourth largest cosmetics business, with annual gross revenues exceeding $10bn, employing more than 40,000 staff and with a presence in 100 countries. Avon now forms the fourth pillar of Natura & Co’s portfolio of leading personal care brands, alongside The Body Shop and Aesop. 

Prior to the merger, Avon was one of Natura’s biggest rivals in direct sales, particularly in its home market of Brazil. The acquisition appears to have been a shrewd move, not only to strengthen Natura’s domestic position but to also enhance its international footprint considerably, increasing Natura & Co’s proportion of sales outside of Brazil by more than 50%. It has also brought two businesses with similar business models under one roof, creating a group with considerable potential to be a global market leader in beauty direct sales.

The acquisition is expected to generate $200m to $300m in annual cost savings, while presenting the opportunity for increased investment in digital, product innovation and brand initiatives.

The acquisition was completed as a stock-for-stock transaction, the largest ever Latin America/US stock-for-stock acquisition on record and the largest ever transaction for a South American beauty and personal care business. Avon stockholders received 0.6 Natura & Co shares for each share of Avon stock, with the transaction representing a 28% premium to Avon shareholders. Upon closing, Avon shareholders owned about 27% of the combined company and could elect to receive American depository receipts traded on the New York Stock Exchange or shares listed on Brazil’s B3 stock exchange.

Markets responded positively to the deal, with Natura and Avon shareholders seeing stock price appreciation of 72% and 101%, respectively, between sign and close. 

Restructuring 

Winner: iHeartMedia’s $16.2bn restructuring 

Financial advisor: Moelis 

iHeartMedia, formally known as Clear Channel, is a global entertainment company and the largest radio broadcaster in the US. The company filed for Chapter 11 bankruptcy in March 2018, after buckling under a debt load of more than $20bn following a leveraged buyout in 2008, when Thomas Lee Partners and Bain Capital purchased Clear Channel for $24bn.

Moelis began engaging with iHeartMedia in 2015. Throughout the intervening years that led up to the company’s Chapter 11 filing, Moelis explored the financial levers that iHeartMedia could utilise to increase its flexibility, strengthen its negotiating position and avoid bankruptcy in the face of its accumulating debt burden. 

This included moving 100 million shares to a new holding company to overcome debt buy-back restrictions, a forbearance on company-held notes that were maturing to avoid a springing lien, which was successful in keeping large swathes of the capital structure unsecured and multiple exchanges and buy-backs of senior notes at a discount. In March 2017, the company attempted a $14.6bn global exchange offer that involved a spin-off of its subsidiary Clear Channel Outdoor. The offer was rejected by bond holders but ultimately spurred negotiations to sign the majority of the company’s creditors to a restructuring support agreement.

Through the multi-year engagement, Moelis executed more than a dozen transactions for the company and successfully managed negotiations with most parties to sustain iHeartMedia’s operation prior to exploring bankruptcy protection. 

iHeartMedia emerged from bankruptcy in May 2019, bringing a conclusion to its three-year restructuring journey. The company’s debt was reduced from $16.1bn to $5.75bn and its entertainment business was separated from its billboard advertising business Clear Channel Outdoor, creating two independent public companies.  

Securitisation  

Winner: Fonadin’s 6.1bn pesos re-tap issuance 

Sole structuring agent and joint bookrunner: HSBC

Joint bookrunner: BBVA

In June 2019, Mexico’s Fondo Nacional de Infraestructura (Fonadin) issued 6.1bn pesos ($257m) of securitised bonds linked to the Mexico-Puebla highway, a vital part of Mexico’s transport infrastructure, connecting Mexico City with the port of Veracruz on its south-east coast. Funds from the securitisation will be used for modernisation and maintenance across Fonadin’s highways network. 

The transaction was a successful re-tap of the first toll road securitisation linked to the highway, which was issued in 2018. The re-tap comprised a 3.86bn pesos inflation-linked tranche with a 4.67% coupon and a 2.3bn pesos fixed-rate tranche, with a 9.11% coupon, both due to mature in 2038, with the bonds listed on the Mexican stock exchange. Despite tepid market conditions at the time, demand was met two-and-a-half times over, with orders from various institutional investors, and keen pricing was achieved. 

It was a clear success for the Mexican government’s objective of attracting private sector investment into infrastructure development, particularly through local capital markets. The Fonadin issuance was the third public sector transaction in Mexico in 2019 following successful issues by FIRA, an agricultural development bank, and Banobras, a development bank for municipal governments and project finance. 

Sovereigns, supranationals and agencies financing

Winner: Costa Rica’s $1.5bn dual-tranche issuance

Joint bookrunners: Citi, HSBC

November 2019’s $1.5bn issuance from Costa Rica marked a strong return to the international capital markets for the sovereign, following a hiatus of more than four years. It has been a choppy few years for Costa Rica, with the country experiencing political challenges and struggling with growing government debt and fiscal imbalances. 

At the beginning of 2019, the administration of president Carlos Alvarado Quesada negotiated a significant package of fiscal measures with the country’s opposition-led legislative assembly, in a bid to restore the economy to a more secure footing. The package included tax reforms and fiscal rules that would cap spending growth based on gross domestic product and debt levels. These reforms enabled the sovereign to build confidence with investors around its future economic outlook.

The dual-tranche offering was made up of a $1.2bn tranche of 11-year notes and a $300m tap of its 7.158% notes due in March 2045, first issued in 2015. The largest international transaction in the sovereign’s history, it attracted major interest from investors across the globe following marketing efforts across the US and in London. The 11-year tenor created a strong benchmark for the country, with the tap of the 2045 bond increasing the liquidity and attractiveness of the overall offering. The issuance received hundreds of orders and was more than five times oversubscribed, allowing pricing to be significantly tightened. 

The bond’s success was particularly positive considering the region’s political disruption, with crises in Chile, Peru and Bolivia creating fears of a spillover. However, investor sentiment remained strong at a global level, following an easing of trade tensions between the US and China and positive third-quarter earnings reports from corporates.