Although Latin America experienced a period of disappointing growth in 2014, the region as a whole underwent some interesting transformations—reforms in Mexico, the election of a new government in Brazil, and the beginning of normalized relationships between the United States and Cuba. While there is no doubt that Mexico is continuing to profit from its membership in NAFTA and the opening up of the energy and real estate sectors, other parts of the region are coming to terms with the impact of the falloff in global commodity prices. The region as a whole remains an investment target for companies from both the developed and developing world.
In Asia, even the region’s established economies of North Asia are facing a new reality of lower, slower growth in response to a global economy that has yet to catch true breakaway momentum. The economies of China, Japan, and Korea, for example, have all announced various stimulus programs. Japan’s Abenomics had a particularly high profile globally, and China’s stimulus program has generated a rebounding market. In fact, all three countries have been increasingly active in developing outbound investment programs to compensate for flat domestic growth. In many respects this is changing Asia’s position internationally from being the target of foreign investment to establishing itself as a major source of outbound direct investment growth.
What is the biggest challenge facing Chinese companies as they seek to expand internationally via M&A deals?
As Chinese companies expand and accelerate their outbound investment internationally, post- closing integration has become a more serious issue, together with strategies to exit existing investments and resolve occasional disputes with cross-border partners. The initial period of outbound growth has been followed by a new period of greater understanding that cultural as well as economic ties between companies are important and complex. As Chinese companies grow and expand, they have come to appreciate that complexity.
When doing business in the U.S., what is the most important issue for Korean companies to consider to minimize their risk of litigation?
When doing business in the U.S., it is imperative that Korean companies have in place global standard compliance programs to serve as a prudent guide for their employees’ behavior and conduct to reduce the risk of litigation and exposure. Such guides are particularly important for Korean companies planning to recruit retired engineers and technicians from their U.S. competitors. Inappropriate behavior by their employees could create a huge legal risk and exposure for the Korean companies.
What is the top trend shaping investment opportunities in the Philippines—and how do you see it evolving this year?
Many Philippine issuers raised equity capital in the first two months of 2015 while the markets were strong. With national elections scheduled for May 2016, some predict the pace of deal activity will slow, as has occurred elsewhere in Southeast Asia. Aside from the gaming sector, which is under pressure in Asia as a result of developments in China, the general Philippines business climate is stable, and investors will continue to look for attractive opportunities.
What do you see as the biggest opportunity—and the biggest challenge—for international investors in Latin America?
The biggest opportunity and biggest challenge for international investors in Latin America is Brazil. The Petrobras/Lava Jato developments, potential defaults and restructurings, and the currency devaluation all present significant challenges. On the other hand, the size of the economy, the natural resources, the general positive historical trends of the last two decades, and, again, the currency devaluation all present opportunities for investors who know their way around the market and act opportunistically.
What is the top trend to watch in terms of investment in Central and Eastern European (CEE) and South East European countries in the year ahead?
Western European banks continue to focus on mending their balance sheets and, while several CEE economies show relatively strong GDP growth, they will continue to sell large NPL portfolios from their CEE subsidiaries. In addition, privatization programs continue in Romania, Croatia, and other Balkan states as part of wider market liberalization measures.
We represented Santander, Credit Suisse, BBVA, BTG Pactual, Evercore, Goldman, Sachs & Co., HSBC, and UBS Investment Bank as initial purchasers in connection with Fibra Uno’s US$2.5B follow-on equity offering. The transaction is the largest equity offering ever in the real estate sector in Latin America, and the third largest equity offering ever in Mexico.
We advised Morgan Stanley as the sole placing agent, global coordinator, and bookrunner on Ping An Insurance Group Company of China, Ltd.’s US$4.75B private placement of new H-shares. The transaction is the largest H-share placement ever and one of the largest primary follow-on offerings in Asia Pacific (excluding Japan) over the past 10 years.
We represented the banks financing IBC Capital Limited’s acquisition of Goodpack Limited, the global leader in steel shipping containers. IBC is a Singapore-based affiliate of global investment firm KKR. We advised Morgan Stanley Senior Funding, Inc., Credit Suisse Securities (USA) LLC, Goldman Sachs Bank USA, Mizuho Bank, Ltd., DBS Bank Ltd., Natixis, New York Branch, Natixis Singapore Branch, Macquarie Capital (USA) Inc., and KKR Capital Markets LLC as joint lead arrangers and bookrunners, Oversea-Chinese Banking Corporation Limited as sole arranger for the revolving facility and standalone letter of credit facility, Morgan Stanley Senior Funding, Inc. as first lien administrative agent, and Credit Suisse AG, Cayman Islands Branch as second lien administrative agent. KKR’s partnership with Goodpack will help the company accelerate its growth by leveraging KKR’s global network.
We advised Citigroup Global Markets Limited, Raiffeisen Bank, and Société Générale Corporate and Investment Banking as joint global coordinators and joint bookrunners on the €444.3M IPO of Romania’s leading state-owned electricity distributor and supplier, Electrica S.A. The offering was the largest-ever Romanian IPO, valuing the company at €900M. The IPO comprised an offering of shares listed on the Bucharest Stock Exchange and GDRs listed on the London Stock Exchange.