Ecopetrol, the Colombian state-owned oil company, is expected to issue up to $2 billion-worth of ADR shares, most likely on the New York Stock Exchange next year, according to investment bankers.
If Ecopetrol does issue shares it will be the latest in a series of successful international issuances by Colombian corporates in recent months. One such issue was by Almacenes Exito, the country’s largest retailer.
In late August, Exito raised $392 million in the first international primary equity offering by a Colombian company in more than a decade. The ADR issue was given SEC exemption, which meant that the stock could be sold only to sophisticated investors via private placements. The decision to make an international placement was influenced by French retailer Casino, which has a 61.5% stake in the company.
"I think that Exito has certainly opened the way for future issues," says Yxa Bazan, head of Latin America depositary receipts at JPMorgan, which worked on the deal. The transaction also signals that the Colombian market is becoming sufficiently mature to make primary issues abroad possible, as investors want Colombian stock in their portfolios.
"There is growing interest in our country," says Jorge Londono, president of Bancolombia, which issued ADRs, through a secondary offering, in New York just after Exito. "Our daily trading volume on the NYSE at the end of the first quarter of 2007 was $10 million and, in contrast, the daily trading volumes at the start of September were $20 million. Interest in the Colombian market is increasing a lot and in turn so are the opportunities for Colombian companies."
Raul Anaya, head of the global consumer group for Latin America at Citi, says: "I would say that Colombia is making very significant inroads into integrating itself with the US. I believe that to a lot of Colombian companies it is an attractive way to place their debt and their IPOs."
In contrast to the offering by Exito, Ecopetrol is expected to seek SEC registration, meaning its shares can be placed on the NYSE and traded. "When Ecopetrol comes to the market, there will be an even bigger splash than Exito because of the size of the deal and because it will be listed on a big stock exchange with SEC registration," says a senior banker in the region.
Unlike in other emerging markets such as Russia and Kazakhstan, the Colombian authorities do not insist that there must be a local portion to any international offering. Ecopetrol issued Colombia’s biggest local IPO worth $2.72 billion at the end of August, valuing the company at $25.5 billion.