Equity capital markets: Sovereign wealth funds go Latin
OGX, the Brazilian mining company owned by billionaire Eike Batista, and the Bolsa Mexicana de Valores, the Mexican stock exchange, both came to market last month with landmark IPOs. They were important deals in a number of respects, including getting Latin primary market issuance going again this year. At least as significant was the emergence of China’s sovereign wealth fund, China Investment Corporation, as an investor in Latin American IPOs.
Batista’s OGX raised R$5.87 billion ($3.6 billion), and if the lead managers – UBS Pactual, Credit Suisse and Itaú BBA – exercise the greenshoe option, the deal could be worth R$6.71 billion, making it Brazil’s largest IPO ever.
The order book reached $30 billion, so the transaction was nearly 10 times oversubscribed. The largest single investor received an allocation of just under 3%. Sovereign wealth funds from Asia and the Middle East accounted for about 10% of shares in total. This was despite the fact that they accounted for less than 10% of demand. The sovereign funds, especially those from the UAE and Kuwait, received generous allocations because, as entities from oil-producing economies, it was felt that they would have a better understanding of the OGX story.