Latin Finance - October 2008 - 12

Structured Finance IIRSA Braves Markets Despite the storm emanating from New York, at least one issuer long in the pipeline was sticking to plans to place a structured bond targeting three distinct classes of investors in Peru and international markets. IIRSA Tramo 5, the fifth leg of the Interoceanica highway complex connecting the Amazon to the Pacific, was set to price $260 million worth of notes, rated BBB Meanwhile, Cap Cana, the Dominican luxury resort being minus by Fitch, across three tranches. Proceeds are to finance the developed by Grupo Brisa, is heard stuck in a rut of bad luck. maintenance and upkeep of the Tramo 5 highway, being handled The company has for nearly a year now been looking to raise by a consortium led by Ecuador’s Hidalgo & Hidalgo. between $200 and $500 million in structured notes but difficult Executives familiar with the transaction say the sponsors are market conditions and the fact that one of its placement agents hoping for an overall yield of 7%-8% for the transaction, based on entered Chapter 11 have left Cap Cana empty handed so far. pricings and secondary performance of similar past deals. The When a 2017 offering failed to come to market via Morgan bonds are to be priced using formulas involving Peru long-dated Stanley and Deutsche Bank in CDS and local and international November 2007, the underwriters sovereign bonds. In mid-September, a Structured Finance by Volume, Year to Sept 15 provided the issuer with a $100 Santander leaps to the top week before scheduled pricing, Peru’s million one-year bridge loan to tide 10-year CDS – which bankers on the Rank Bookrunner Value $m # deals it over until conditions improved. deal were using as a benchmark – 1 Banco Santander 809.34 13 With that bridge coming due in was quoted at around 240 basis 2 Banco Bradesco 696.85 2 November, the borrower is heard to points. 3 Value Casa de Bolsa 691.28 3 have attempted to place some $260 “We are targeting Peruvian cash 4 Scotia Capital 606.03 3 million in notes via Lehman in the investors, and offshore cash and 5 BBVA 591.49 2 private bond market over the past synthetic investors,” says Olivier 6 Ixe Casa de Bolsa 586.88 5 months at a rate rumored topping Baratier, managing director at BNP 7 Larrain Vial 545.23 1 12%. After Lehman’s implosion in Paribas, which is leading the deal. 8 HSBC 533.57 11 mid-September, however, the fate BNP teamed up with Banco de 9 Credit Suisse 501.46 2 of the deal is once again in Credito del Peru to distribute a $75 10 Banco de Valores 483.64 60 question. million tranche of 2030 zero-coupon Subtotal 6,045.77 94 Elsewhere, despite a drop in notes to local insurance and pension Total 11,320.67 171 volume, structured markets in funds. Net proceeds to the issuer from Brazil, Argentina and Mexico in Source: Dealogic this piece are expected to be some particular have demonstrated an $18-$20 million after funds for the impressive vitality that bodes well principal and accrued interest, to be paid at maturity, have been for issuers going forward. “We’re seeing consortiums of real set aside. estate investors looking at issuing notes backed by commercial The two other pieces include an $85 million tranche of notes real estate properties in Mexico,” says Salgado, noting due 2020 and a $100 million piece of 2030 bonds. Offshore cash commercial mortgage backed securities as a new development for investors can access the bonds directly, while hedge funds and the region. other institutions preferring to take BNP counterparty risk can take Given heavy investment in malls, office and industrial it through a CLN-like structure, says Baratier. BNP would purchase properties in Mexico over the past three years and more some of the notes, bringing them onto its own books, then recently in Brazil, this is a natural, but exciting development for repackage the risk for investors such as hedge funds and other the region, notes the analyst. So far, real estate investors, institutions. Collateral for the notes is the same as the previous whether via private equity funds or REITs, have played the role four offerings – CRPAO certificates, which are government backed of equity investor. But as in the US, they can play an important guarantees of payment delivered upon construction completion role in developing local debt markets. milestones. Mexico and Brazil have so far been the most active local The IIRSA Tramo 5 offering addresses a key structural problem markets, with the greatest diversity of collateral types backing faced by its predecessors in previous CRPAO deals: the negative new issues. LF carry generated by the fact that proceeds are raised up front, but then placed in a vehicle to await drawdown from a sponsor. Since the cash yields less while inside the vehicle than what it owes UPDATE investors, it has to compensate for this with funds that might For daily structured finance news see www.latinfinance.com ordinarily go to the project. “In this structure, the investors’ funds are committed but not drawn” says Fitch LatAm structured finance analyst Mark Salgado. “This effectively eliminates the risk of negative carry,” he adds, noting investors are legally bound to provide proceeds, so there is no risk of them pulling out of the deal without committing funds at a later date. Cap Cana Capsized? 12 LATINFINANCE October 2008

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Latin Finance - October 2008

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