Holding off DCM challengers

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By:
Rob Dwyer
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Judging success by league tables is problematic, not least because there is no consistency between results. Unsurprisingly, Bond Radar, the tables being used by Deutsche Bank, show the German bank at the top of the table with a total Latin American international issuance volume of $12.5 billion or 15.8% market share on the back of 34 deals, ahead of JPMorgan.

The Dealogic table used by Euromoney has Deutsche Bank at third, with a market share of 11.5% behind BAML (13.2%) and JPMorgan (12.5%). However, in the current market, getting any deals done has been an achievement and Deutsche Bank’s joint mandate on América Móvil’s (AMX) dual euro and sterling market can certainly be considered that.

In a thin and volatile market, AMX sold €1 billion of 2019 bonds at 99.049 with a 4.125% coupon to yield 4.268%, as well as £500 million of 2026 notes at 99.280 with a 5% coupon to yield 5.007%. The euro notes attracted a book of €3.5 billion and the sterling deal saw demand of around £2 billion. Deutsche was bookrunner on both deals, teaming up with Credit Suisse on the euro tranche and HSBC on the sterling issue.

Alberto Ardura, head of Latin American DCM for Deutsche Bank in New York, said the deal made an important statement. "In October, the markets were generally shut down for everyone – there was very negative sentiment – but then América Móvil came and re-opened the market," says Ardura. "Of all the high-grade issuers that could re-open the markets, it was a world-class Latin American company who did it.

"Even in such a negative environment, AMX managed to come with new issue premiums of 19 and 21 basis points for the sterling and euro transactions respectively, which were among the tightest new issue premiums for any high-grade issuer this year in these markets."

Some of Deutsche’s other deals have also convinced Ardura that the liquidity is there for strong credits, despite the continuing risk-aversion sentiment. The bank led the $250 million re-tap of its 2021s for the Dominican Republic with Citi last month and the deal was more than eight-times oversubscribed.

The bank also worked on a $610 million bond for utilities company Empresa de Energia de Bogotá (EEB) and a $250 million 10-year deal for Instituto Costarricense de Electricidad (ICE), with the latter attracting a book of $2 billion. "Granted, utilities is a defensive sector but still these split-rated Baa3/BB+ credits were both heavily oversubscribed," says Ardura. "Investors are keen to look at Latin American issuers as a way to diversify their risks and they understand that risks in this region are very different to others."

Deutsche is often accused of lowering fees to win bookrunning mandates, and this year the bank has closed deals for the Dominican Republic, Chile, Venezuela, Mexico, Jamaica and El Salvador. However, Parnes says the bank is price sensitive. It is understood that Deutsche – with others – did not compete for the Eletrobras mandate, which was rumoured to have been awarded for a fee of one basis point.

Parnes defends the bank’s business model, which, through its strength in FX and derivatives trading globally in the region, enables the bank to make money out of related trades – especially in the FX market. Deutsche has also leveraged the sovereign wins. For example, it followed the re-opening of the Colombian peso trade for the sovereign last year, with the first three Colombian-peso-denominated transactions for Colombian corporates, and it was a similar story with Brazil – after the Republic of Brazil’s global real-denominated transaction, it led deals for AB InBev, Itaú, Brasil Telecom and Banco Votorantim. After the global Colombian peso transaction for the Republic of Colombia and its reopening, DB led the first global peso deal from a Colombian corporate for Emgesa.

"This bank has always been focused on capital markets, but we are not a lending bank, so we tend to win mandates on differentiated and timely ideas and execution," says Ardura. "Obviously, we are dealing in a market where fees are becoming tight but to the extent that we try to create recurrent and collateral businesses with our clients, which in turn generates volume."



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Debt-defying Deutsche eyes equities