Latin America Equity House: Bank of America Merrill Lynch

IFR Review of the Year 2017
5 min read
Paul Kilby

Regional reach

Latin America’s primary equity markets roared back to life in 2017, and one bank showed dominance across the region. For leading landmark trades, showing good market reads and bringing true value to clients, Bank of America Merrill Lynch is IFR’s Latin America Equity House of the Year.

Being a LatAm ECM banker has been a tough slog in recent years, but after a long drought business finally picked up in 2017, as stock markets soared in Brazil and Argentina on hopes that economic recoveries were round the corner.

“It has been the highest volume year since 2013,” said one ECM banker. “It has been fantastic. Our two core markets – Mexico and Brazil – were wide open and Argentina has become increasingly relevant.”

Volumes for IFR’s award period between November 16 2016 and November 15 2017 reached US$18.314bn, more than doubling the close to US$8bn seen during the prior period.

With US$1.82bn in proceeds credited to its name, Bank of America Merrill Lynch stood firmly in second spot on the league tables, just behind Brazil’s Itau, according to Thomson Reuters data.

Yet while the Brazilian bank benefited from garnering a string of mandates on its home turf, BAML proved itself to be a truly regional player under Bruno Saraiva in Brazil and William McArthur in the rest of the region.

It took a lead position on most major deals, ranging from a US$700m issue from FUNO – the largest real estate follow-on from Mexico since 2014 – to a string of marquee bank trades out of Argentina.

The US bank also punched above its weight in Brazil, beating international rivals to compete against local institutions with deep lending relations in that country.

This included winning the mandate on one of the most eagerly awaited deals of the year, a R$4.97bn (US$1.4bn) IPO for the country’s largest retailer Carrefour Brasil.

The deal – the biggest IPO from Brazil in the last four years – proved tougher than expected as falling inflation over the marketing period was seen as hurting the company’s top-line growth.

But leads helped keep pricing within the R$15–$17 range after a key anchor order was brought in at the last minute.

BAML also garnered top economics on a R$1.14bn (US$360m) stock sale from fast-growing retailer Magazine Luiza, while also winning the mandate on a 100% follow-on for Spanish rival Santander Brasil.

Yet it is in Argentina where BAML arguably best showed its skills in reading the market ahead of the mid-term elections that were seen as a litmus test for President Mauricio Macri’s reform agenda.

Argentine banks were major issuers in 2017 as they sought to fund growth and potential acquisitions in a still-fragmented marketplace.

Not only did BAML win mandates on the vast majority of these trades, but its market read proved key to their success.

In June, it helped Banco Macro, the country’s largest bank by market capitalisation, with a US$770m follow-on just before stocks tumbled on the country’s failure to achieve emerging markets status on the MSCI index.

The rally in expectation of that MSCI promotion helped the bank price the deal at a 1.3% discount to the last price and a 0.9% premium from file to offer. “Even by US standards that is tight,” said the ECM banker.

BAML was also instrumental in advising Grupo Supervielle to hold off on a US$475m follow-on – a global offering of ADS that had been sitting in the pipeline since July as supply fatigue weighed on the market.

But with the primaries in August showing favourable momentum for the market-friendly president, Supervielle was advised to move ahead in early September and get ahead of a backlog of deals.

This proved to be indispensable advice, allowing the bank to price the deal at a 7.1% premium to the 30-day volume-weighted average price.

BAML has acted as lead-left on all three of Supervielle’s recent equity deals and its latest success led to a call from Banco Galicia to come in as global coordinator on its US$633m follow-on.

With the market already pricing in a strong showing for Macri’s party and a string of corporates readying deals, Galicia was advised to print sooner rather than later.

The move paid off as books swelled to five times coverage, including multiple US$100m “fill-or-kill” orders.

The deal was priced at a 0.4% discount, even out-gunning Macro’s tight finish.

BAML topped off its successes in Argentina with a blowout IPO from Loma Negra.

The bank was mandated global coordinator along with two other institutions after owner InterCement received bids from 16 banks.

“We could take no risks and really wanted to make sure we put the best banks in this transaction,” Paulo Diniz, InterCement’s CFO, told IFR.

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Latin America Equity House: Bank of America Merrill Lynch