LatinFinance - January/February 2015 - 54

Source: Grupo Aval

led by global coordinators
Goldman Sachs and
JPMorgan and joint
bookrunners Citibank
and Morgan Stanley. Law
firms Davis Polk, GómezPinzón Zuleta, Martínez
Neira, and Simpson
Thacher advised on the
transaction.
The share sale had
elements of an IPO and
a follow-on - Aval's
instruments already
traded on the Colombian
stock exchange. But
because of the debut of
the company's ADRs,
LatinFinance considered the transaction to
be in the IPO category.
The deal - the largest Colombian ADR
offering ever - was a rare bright spot in
a tough year for Latin America's equity
markets. Outflows from emerging market
equity portfolios, and particularly from
Latin American funds, underpinned a
difficult climate for companies wanting to
issue stock.
Despite this backdrop, Aval's ability to
draw a heavily oversubscribed order book
and to print the biggest IPO from Latin
America in 2014, makes the transaction
stand out.

BIG OCCASION: Grupo Aval chief executive Luis Carlos Sarmiento Gutiérrez with
chairman Luis Carlos Sarmiento Angulo
and others, at the firm's $1.1 billion New
York Stock Exchange listing in September

"Not only are they really good, very
sophisticated and knowledgeable, but they
are keeping us on our toes," Sarmiento says.
"They are starting to visit us with certain
regularity. They know their stuff, and they
ask the right questions."
Aval's base of institutional investors
is restricted in the local market by its
ownership of pension fund administrator
Porvenir, the country's biggest, which is
not allowed to hold stock in the parent
company. Around 88% of the New York
IPO was allocated to institutional investors,
while 12% went to retail.
"These are investors that trade in
companies worldwide and that only trade
in companies that pass muster, and to pass
muster, you need to be able to convince
them of things like adequate governance,
returns, prospective growth, etc.," says
Sarmiento.
Aval sold 81.5 million preferred shares in
the form of American depositary receipts
on September 22 at $13.50 each, in a deal
LUIS CARLOS SARMIENTO
GRUPO AVAL

"THESE ARE INVESTORS THAT TRADE IN
COMPANIES WORLDWIDE AND THAT ONLY
TRADE IN COMPANIES
THAT PASS MUSTER"
54 LATINFINANCE.COM - January/February 2015

After trading up in the days after the
offering, Aval's ADRs have since lost value.
The shares were changing hands at $13 by
the end of November. Sarmiento attributes
that to the fall in the Colombian peso, noting
that Aval's stock has risen on the local
exchanges since the US listing.
"Part of what moves an ADR is the
movement of the peso against the dollar,"
he says. By the end of November, the
Colombian peso had fallen more than 8%
against the US dollar since Aval's September
listing.
"The market has to recognize the
devaluation of the peso to figure out the
price of the ADR, but when the peso
devalues more than the price drop in the
ADR, what the market is saying is they're
giving us credit for the performance of
the company - but they have to adjust
somewhat for the peso."
Aval was set to begin deploying the cash
raised in the fourth quarter, with banking
subsidiary Banco de Bogotá first on the list
for a capital injection. Further acquisitions
were not on the horizon when LatinFinance
spoke to Sarmiento in November.
"We'll probably end up strengthening
indirectly the capital position of another
one of our banks; that's still in the works,"
he said. "We'll probably use the remaining
money to reduce a little bit the debt position
of Aval." LF

EQUITY FOLLOW-ON

Fibra Uno MXN32.8bn share sale
The growing international allure of Mexico's economic
potential pushed this deal to a record size
With bulk of President Enrique Peña
Nieto's economic reforms already set out,
for Mexico 2014 was a year focused on
cementing the details of the agenda. Growth
remained slow, but hopes were high.
In this context, the equity market put in
a decent, if not stellar, performance. The
country's main stock index, the IPC, rose
from 42,727 at its 2013 close to 44,190 by
December 1, 2014.
Mexican companies nonetheless
dominated new equity issues in an
otherwise quiet year for the region. The
market was not for everyone. Even rapidly
internationalizing food maker Bimbo
decided that it was better off waiting for

better conditions to push ahead with a
follow-on share sale. Others braved the
conditions, hoping for an opportunistic
window.
Fibra Uno had been the first real estate
trust from Mexico to come to the public
equity markets, with a $298 millionequivalent IPO in March 2011 that opened
the way to a new asset class.
Fibras - fideicomisos de inversión en
bienes raíces - are similar to US real estate
investment trusts, or REITs, although they
have not always drawn a strong following
from the same investors. Fibra Uno's 32.8
billion peso ($2.3 billion) follow-on sale in
June was the first to truly demonstrate the
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