Issue: Daily News - 10 November 2010
By Euroweek Reporter
Banco Votorantim brought its debut Swiss franc deal to market on Wednesday morning, a Sfr250m three year.
Sole bookrunner Deutsche Bank priced the deal 204bp over swaps, beating Votorantim’s dollar funding costs in the three year tenor. The issuer is the first Brazilian issuer to do a Swiss franc deal since 1995.
A syndicate banker from Deutsche said that Latin America generally, and Brazil in particular, has a great macro story.
He also highlighted Votorantim’s business model and defensive ownership — the bank is 50% owned by Banco do Brasil, a state-owned entity, and 50% owned by the Votorantim conglomerate.
The issue went almost entirely to retail investors. The bond was fully placed, but not oversubscribed, although it is already performing in the aftermarket — it has tightened around 2bp since pricing on Wednesday morning.
Because absolute yields are so low in the Swiss franc market, investors are looking further down the credit curve or at longer maturities, creating opportunities for EM issues in what some consider a conservative market.
Deutsche took Votorantim on a three day roadshow last week.
Because the deal hit Sfr250m, it is eligible for the Liquid Swiss Index, the benchmark for many asset managers in the market.
Banco Votorantim: The Votorantim Group is one of the largest privately-held industrial conglomerate groups in Latin America.
Swiss franc: The franc (German: Franken, French and Romansh: franc, Italian: franco; code: CHF) is the currency and legal tender of Switzerland and Liechtenstein; it is also legal tender in the Italian exclave Campione d'Italia.
Swaps: In finance, a swap is a derivative in which counterparties exchange certain benefits of one party's financial instrument for those of the other party's financial instrument.
The benefits in question depend on the type of financial instruments involved. For example, in the case of a swap involving two bonds, the benefits in question can be the periodic interest (or coupon) payments associated with the bonds.
Specifically, the two counterparties agree to exchange one stream of cash flows against another stream. These streams are called the legs of the swap.
The swap agreement defines the dates when the cash flows are to be paid and the way they are calculated.Usually at the time when the contract is initiated at least one of these series of cash flows is determined by a random or uncertain variable such as an interest rate, foreign exchange rate, equity price or commodity price.
The cash flows are calculated over a notional principal amount, which is usually not exchanged between counterparties. Consequently, swaps can be in cash or collateral.
Derivative: a word or thing that has been developed or produced from another word or thing.
Collateral: Property or sth valuable that you promise to gvie to sb if you cannot oay back money that you borrow.
Tenor : The length of time until the maturity date is often referred to as the term or tenor or maturity of a bond
Issuer: is the entity (company or govt.) who borrows an amount of money (issuing the bond) and pays the interest.
Syndicate： The most common process of issuing bonds is through underwriting.
In underwriting, one or more securities firms or banks, forming a syndicate, buy an entire issue of bonds from an issuer and re-sell them to investors.
Aftermarket: The period immediately after the market listing of shares issued via an Initial Public Offering (IPO), when investors can trade in the stock for the first time.
Yield: to produce or provide sth, for example, a profit, result or crop
Maturities: Maturity: (of an insurance plicy, etc.)the time when money you have invested is ready to be paid
EM: emerging market
Liquid Swiss Index: Credit Suisse is a leading global financial services company, offering clients financial advice in all aspects of private banking, investment banking and asset management.
Credit Suisse First Boston launched the Liquid Swiss Index (LSI) at the end
Benchmark: Something which can be measured and used as a standard that other things can be compared with
Asset managers: Asset management refers to the professional management of investments such as stocks and bonds, along with real estate.
Dealer: a person whose business is buying and selling a particular product
Roadshow: a travelling show arranged by a radio or television programme, or by a magazine, company or political party
Yield curve: In finance, the yield curve is the relation between the interest rate (or cost of borrowing) and the time to maturity of the debt for a given borrower in a given currency.
For example, the U.S. dollar interest rates paid on U.S. Treasury securities for various maturities are closely watched by many traders, and are commonly plotted on a graph such as the one on the right which is informally called "the yield curve." More formal mathematical descriptions of this relation are often called the term structure of interest rates.
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