As the first half of the year draws to an end, Morgan Stanley continues its impressive ride in Latin America’s debt capital markets. At the end of the second quarter, the bank maintained its number one position in the league tables for 2006, according to Dealogic, narrowly preserving its lead over Deutsche Bank and JPMorgan.
The firm is undergoing a renaissance in its emerging markets business, especially in Latin America. Over the past few years, Morgan Stanley was conspicuous by its absence in the region – its name was rarely seen in the top half of the league tables – and rivals were speculating that it might be about to pull out of Latin American debt. The bank claims instead that it was reassessing its focus, away from unprofitable, league-table driven business and more towards the sexier corporate credit trades. Indeed, the bank argues that from a revenues perspective it remained competitive even when its name disappeared from the top echelons of the league tables.
The change in Morgan Stanley’s visibility in Latin America can be traced to the return of John Mack as CEO exactly a year ago. One of the first things Mack and co-president Zoe Cruz did was to make the emerging markets one of the cornerstones of the bank’s business. In Latin America this has meant a revamping of the structure to allow greater coverage of the region. In February, the bank appointed Guillermo Jasson as its first head of Latin America. Jasson is in charge of all of the bank’s activities in the region – not only M&A but also bonds, equities and sales and trading.
Then, in April, the bank created a Latin America group in its global capital markets division. The group is headed by Diego Ferro and brings the derivatives and origination teams under one umbrella. Morgan Stanley is not alone in integrating its debt business in the emerging markets: many of its rivals are doing the same. This strategy makes sense as corporates are becoming more sophisticated and banks need to be in a position to provide them with integrated and, at times, complex solutions. Even sovereigns’ financing needs are changing, with as much emphasis being placed on liability management as on basic fundraising.
The good news for Morgan Stanley is that it is winning all types of business in Latin America. This year it has executed liability management sovereign trades for Brazil, Colombia, Mexico and the Dominican Republic, and TFM and Transener in the corporate world. Other recent successes include a $170 million bond for Transtel, the first CCC+ rated deal by a Latin American credit; a $450 million perpetual bond for Cosan; and a $150 million offering for Sagicor, in its debut transaction in the US dollar debt capital markets.
Its rivals are taking notice. Morgan Stanley is once more a force to be reckoned with.
