LatinFinance - May/June 2014 - 8

NEWS
EQUITY

After a poor showing for Latin America's equity markets,
Brazilian telecom Oi's jumbo follow-on showed that deals can get done.
By Katie Llanos-Small

Oi dials up success
latin america's equity markets
showed signs of recovery
in march and april. the
benchmark indices in Brazil
and chile posted overall gains
in the first four months of the
year, although mexico's had
fallen 4.8% over the same
period.
Still, companies largely
stayed clear of the primary
equity markets. Brazilian
telecom Oi was the only latin
firm to bring an international
deal. the large-scale offering
was put under extra pressure
given that it was needed for
the company's merger with
Portugal telecom, agreed last
year, to go through.
Despite a rough
performance for oi stock over
most reference periods - it has
traded down since January,
over the past year, even over
the past two years - the
company raised the capital it
needed, and notched up one of
the region's largest transactions
in the process.
the deal raised 14.9 billion
reais ($6.7 billion) in total,
although only 8.4 billion reais
- 1.2 billion common shares
and 2.78 billion preference
shares - went to the market.
Portugal telecom bought 1.05
billion common shares and 1.72
billion preferred shares in the
deal, while caravelas, a fund
controlled by BtG Pactual,
bought 171 million common
shares and 359 million
preference shares, under
pre-agreed subscription deals.

8 l atinfina nce.com - May/June 2014

following the deal, Portugal
telecom owns 37.41% of oi.
a large bookrunner group
led by BtG Pactual priced
oi's common shares at the
lower end of a 2 to 2.3 real
range that was heard to
have been indicated to some
accounts. the preference
shares were sold at 2.17 reais.
the shares could have been
priced at a higher level - the
deal was heard to be "well
oversubscribed" - but the
final structure of the deal was
chosen to ensure a decent
aftermarket performance,
LatinFinance understands.
existing shareholders were
heard to have submitted
around 1 billion reais of orders
for the transaction in a rights
offering.
the stock traded down the
day after pricing, but stayed
above the pricing levels of the
new instruments. the common
shares closed at 2.11 reais the
day after the deal was finalized,
a 10.97% drop on a day of heavy
trading. the preference shares
followed a similar trajectory.
BtG Pactual was lead
coordinator. it joined Bank
of america-merrill lynch,
Barclays, citi, credit Suisse,
espírito Santo investment
Bank and HSBc as global
coordinators and joint
bookrunners. coordinators
were BB investimentos,
Bradesco, caixa, Goldman
Sachs, itaú, morgan Stanley
and Santander.
elsewhere, Bancolombia's

ECM rank by volume, year to April 25, 2014
Thin market
Rank

Bookrunner

Value $m

# Deals

1
2
3
4
5
6
7
8
9
10

Grupo aval
Bancolombia Sa
credit Suisse
citi
larraín Vial Sa
BtG Pactual
Bofa merrill lynch
morgan Stanley
JPmorgan
Deutsche Bank

1,228
1,085
541
447
299
233
165
109
85
56

1
1
5
2
1
4
2
1
2
1

Total

4,376

13

Source: Dealogic

equity follow-on raised $1.3
billion. it was priced above the
guidance range, after drawing
an order book that was nearly
three-times subscribed. the
bank's 110 million preference
shares were sold at 24,200
pesos ($11.78) each.

Inflows return

Despite the rise of equity
indices in Brazil and chile,
investors pulled cash from
latin america-focused equity
funds overall in the year to late
april. latin american equity
funds registered $2.79 billion of
outflows in the year to april 23,
according to data from Barclays
Research and ePfR Global.
that came even though
inflows had resumed after
heavy outflows in the early part
of the year. latin america fared
better than others, though -
turmoil between Russia and

Ukraine caused cash to leave
that region, largely in favor of
other emerging markets.
meanwhile, small companies
in Brazil and chile are set for
help to come to the market.
Brazilian development bank
BnDeS allocated 1 billion reais
to invest in local companies
that are listing on the country's
growth market, the Bovespa
mais. the earmarked funds are
part of a 3 billion real package
to support smaller companies
looking for external capital.
in chile, the Santiago Stock
exchange and tSX Venture
exchange - a subsidiary of the
toronto bourse - announced
plans for a listing platform
for growth companies. the
market is set to target small and
medium sized chilean firms,
especially mining companies,
and is expected to launch next
year. LF
http://www.latinfinance.com
LatinFinance - May/June 2014

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