The contrasting fortunes of two financial deals, at either end of the year, provide the backdrop to their growing confidence.
At the start of 2012 Bank of America Merrill Lynch led a group of banks on the recapitalisation of Unicredit, the troubled Italian bank, in a deal that nearly ended in complete tatters. Within four days of the subscription price being announced, Unicredit’s shares had fallen 40 per cent and were heading to within 10 per cent of the deeply discounted share price.
The shares recovered, but only after the introduction of long-term refinancing operations from the European Central Bank (ECB) gave banks access to low interest funds.
The eventual issue was claimed a success but there were some very frazzled nerves along the way, with bankers fully expecting their organisations to be left with more of the underwriting stock than they could possibly have cared for.
Within the past few weeks, many of the same bankers have been involved in the refinancing of Banco Popular, a Spanish bank that would have needed a government bail-out without the support of a substantial share issue.
The deal was for a capital raise of €2.5bn, doubling the troubled group’s market capitalisation.
The rights shares, which were discounted at a relatively modest 31 per cent, were snapped up.
Says Craig Coben, head of European equity capital markets at BoA Merrill Lynch: “The success of the Banco Popular issue suggests that investors are now prepared to recapitalise some of the European periphery banks.
“This feels very different from some of the other rights issues for Euro-periphery financials where the shares were volatile and in some cases fell below the subscription price. Popular’s issue never fell back and the deal was very clearly stabilised at an early stage,” adds Coben.
A bit more confidence going in to the new year on such deals would certainly not go amiss.
NEW YORK WANTS RUSSIAN DEALS
Be careful what you wish for. Ahead of the recent London and Moscow IPO of the Alisher Usmanov mobile telecoms group Megafon, some commentators argued that the flurry of Russian flotations were something of a stain on the London market.
Well, the New York financial authorities are making it clear they will welcome them with open arms. An article in the Moscow Times, headlined: New York Exchange Wants Slice of Russian IPO Pie, quotes Albert Ganyushin, the NYSE Euronext’s head of international listings as saying: “I would not be surprised to see several...potential IPOs in Moscow and New York taking place in the next 12 months.”
London doesn’t have a monopoly on Russian flotations and initiatives such as the Jobs Act in the US, which makes it easier for companies with less than $1bn in revenues to raise capital, are intensifying competition for IPO business.
London is hardly in a healthy enough position to let these deals slip away to other shores.