The challenge
In 2006, we approached BICBANCO, the eighth largest privately-owned Brazilian commercial bank in terms of assets and proposed a structure for a bond issue to enable it to expand its lending activities – BICBANCO’s primary business being lending to medium-sized Brazilian companies.
It was a choice occasioned by the fact that Dresdner Kleinwort had previously acted as arranger and dealer for the bank’s US$200 million Euro Medium Term Notes, executing two take-downs with a combined value of US$70 million.
Our response
Acting as sole bookrunner for the deal – and making full use of our global reach – we launched the issue which attracted strong investor interest from Hong Kong, Singapore, Geneva, Zürich, Frankfurt, New York, Miami and London.
We did this by using the strength of our bond franchise, with proven expertise in innovative structuring, global distribution and top-ranked emerging markets research.
Our strength in EEMEA, especially in Russia and Kazakhstan, led us to do hybrid capital trades for banks in the region. Recognising investors’ interest in these securities and names, and in Brazil, plus the intrinsic strength of Brazil's middle-sized banks and their need for regulatory capital, led us to the conclusion that the trade would make sense for both investors and the issuer.
The result
The issue was heavily oversubscribed, with the bulk placed in Europe and Asia. The successful deal allowed BICBANCO to increase its Basel capitalisation ratio, expand its lending activity, diversify fund sources and obtain long-dated financing – as well as tapping into a new investor base.
The issue was one of three highly successful capital markets transactions for BICBANCO over a 12-month period, demonstrating our ongoing commitment to our clients and also our ability to execute innovative funding solutions that leverage our international reputation.
It was also a pioneering transaction that opened up new opportunities for non-investment grade corporates in Latin America.
The BICBANCO trade led to three other middle-sized banks doing such trades in Brazil in the same year (PanAmericano, Banco Mercantil and Banco Cruzeiro do Sul – two of which we led), as well as a perpetual bond for Mexico's Metrofinanceira. We were the leader in hybrid capital for financial institutions in 2006 in Brazil, and the leader in terms of overall issuance by FIG clients in Brazil in the same year, according to Valor Economico.
