Latin America Loan House
Weathering the storm: In a year of significant changes to the LatAm loans landscape, HSBC was active across the region, smartly leveraging its local presence and balance sheet. For navigating the tricky market and offering a wide range of loan products across the region, HSBC is IFR’s Latin America Loan House of the Year.
As the cliche goes, some see opportunity where others see risk. With a solid regional balance sheet and less pressure at home, HSBC was in a strong position to lead transactions and the bank was bookrunner or lead arranger on more than 20 transactions in the 12 months up to November 2011.
That would be no small feat anytime, but with the kind of challenges lenders faced in that period, it was even more of an achievement.
At the beginning of the year when liquidity was plentiful, competition was fierce – not only were banks aggressively originating new loans, they were also pitching tighter refinancing of existing loans.
However, volatility intensified after July – first because of the US downgrade, then as a result of a deepening European sovereign debt crisis. The turmoil hit the Old Continent hardest, forcing Europeans to curb their participation in deals. Suddenly lenders that represented as much as half of the bank money available in the market were bowing out of new facilities or reducing ticket sizes.
At a time when banks did not want to take on more risk, the ability of banks to distribute was even more crucial. “We were involved in complex deals and we wanted to ensure there was minimal retention, so we always distribute properly,” said HSBC’s Monica Macia, head of loans syndication for Latin America.
Bringing in new lenders
The bank led the way in bringing new lenders to Latin America, using its global footprint as a springboard. For example, to bring Taiwanese banks into the Itau deal, the Latin American syndicated loans team co-ordinated with the Hong Kong office.
However, making good on its motto of being a global local bank, HSBC also cross-sold some of the project finance deals it led within Latin America, bringing some of the strongest local lenders to deals they would have not even looked at before. They brought banks from Peru to Colombian deals, and lenders from Panama and Brazil to Peruvian and Colombian facilities.
Speed and flexibility also became paramount as some deals had to be adjusted, for example by adding tranches with different currencies. “In deals like Nemak and Itau, we did things like adding a euro tranche so that there was more participation from European and Taiwanese banks,” said Macia.
In short, HSBC trimmed its sails to every turn of the wind throughout the year. When true syndication returned in the beginning of the year, it was actively distributing tickets even as margins and spreads hit record low levels. As the market veered back into a more clubby scene, HSBC’s participation was key to close new facilities.
For instance, the US$1bn loan achieved by Brazilian telecoms giant Telemar was struggling, given volatile market conditions. It only took off after HSBC came in at the bookrunner level. “The pricing was tight and coming in at the bookrunner level later, in the volatile conditions, meant we had to work hard to get the deal syndicated,” said Macia. “Telemar is an important relationship for us, we were able to underwrite a quarter of the deal and we were confident we could get down to our final hold, which we did.”
Offering variety
But HSBC also earned its title by moving across the region and offering a broad range of products. The bank did deals in Chile, Brazil, Mexico and Argentina. It also was active in different sectors, lending to financial institutions in important deals for Itau and Banco de Bogota, as well as project finance deals such as Odebrecht’s. The bank still stepped up for its clients when they were doing acquisitions, providing M&A financing for Grupo Suramericana and Petrotemex.
HSBC was also present in most of the noteworthy transactions of the year.
In December of 2010, just as the market was moving from a previously club-like environment back to a syndicated one, it was a joint lead arranger and bookrunner on Pemex’s US$3.25bn facility.
The size and pricing were watersheds at the time, but even more important was the tenor – until then term-facilities longer than three years were rare. When Pemex, six months later, refinanced the loan shaving off 50bp of the spread, HSBC was there again.
The bank was not only at the helm of quasi-sovereign transactions. It was bookrunner on the 12-year US$1.5bn loan facility for Odebrecht, which was one of the longest tenors to ever come out of Latin America for a project finance deal.
And its syndication abilities were not only evident in US dollar-denominated transactions. It was sole bookrunner on the Ps1.78bn (US$132m) senior unsecured term loan for Cinemex. This was the first ever Mexican peso syndicated loan and demonstrated HSBC’s ability to find different forms of financing for its clients – something that will prove precious in the current environment.
Indeed, HSBC did such a good job that even some of its competitors were praising them. One loans banker expressed admiration for the bank’s discipline on pricing. “We have the cheque book, but it has to make sense, it has to be a key relationship and we use it very little compared to other banks,” Macia said.
Syndicated loans bankers from other houses also said that the range and type of transactions it had been involved in showed its broad expertise. “Some of the top banks will only really be involved in corporate deals while others focus purely on project finance, but HSBC is one of the banks that have been involved in a variety of types of transaction,” said one market participant.
Borrowers also put HSBC at the top of their list. The funding manager for one of the largest quasi-sovereign borrowers in the region noted that when many of his relationship banks were hard-pressed for liquidity, HSBC was still supporting him.
And the region is a key priority for HSBC. Co-head of debt capital markets for the Americas, Katia Bouazza is certain the bank will not be pulling back lending in the region. “For us Latin America is a growth business,” she said.
To be sure, it is not like HSBC will be completely immune to the changes the market is undergoing. “Everyone is being careful about underwriting and deals are carefully managed, but we can still underwrite certain names,” said Macia. “We are not afraid of doing deals, we can access different markets and can co-ordinate with our teams across Latin America to see the best way to get a deal done,” she added.
