Americas deals of the year

Author: | Published: 2 May 2012
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Debt and equity-linked: BBVA Paraguay

L-R: Jorge Ig Gross Brown of Estudio Gross Brown Abogados, Danielle Myles of IFLR

BBVA Paraguay's $100 million senior notes offering last February was the first cross-border capital markets transaction out of Paraguay. What made it even more interesting, there was no guarantee from its Spanish parent and no security.

The Reg S/Rule 144A issuance required the preparation of country disclosure for the first time, including the first rule 10b-5 opinion, and a learning process for regulators, lawyers, accountants and auditors – some of whom had to be flown in to assist. Pragmatic solutions were needed to efficiently resolve discrepancies between local and international accounting methods and regulatory requirements.

The country's sovereign rating combined with the bank's reputation meant the covenants, for which there was no precedent, reflect a hybrid instrument, combining investment grade with non-investment grade features.

The first-time deal was further complicated by the issuer being a bank.

Cleary Gottlieb Steen & Hamilton and Estudio Juridico Gross Brown acted as US and Paraguayan counsel respectively to the issuer.

Shearman & Sterling and Mersan Abogados acted in the same roles to underwriters Citigroup and BBVA Securities.

Runners-up

Barrick Gold
The Canada-based gold miner's use of a front-end tender offer, followed by a compulsory acquisition in its takeover of Equinox Minerals last June required financing to be locked in early, but with the flexibility to take up only the funds it needed. Rather than closing the $4 billion it raised in the debt markets into escrow, Barrick included a mandatory redemption provision in three of its four tranches of notes, which were triggered if the acquisition of Equinox didn't occur by a specified date. Extra pressure was added by a competing bid for the target, and the target having an outstanding offer to acquire another company.

Sullivan & Cromwell was US counsel to the issuer with Davies Ward Phillips & Vineberg acting as Canadian counsel. The managers were represented by Skadden Arps Slate Meagher & Flom.

Emegsa
Last year Colombia's biggest power generation company set a strong precedent for other local issuers looking to tap the international debt market. Its $400 million peso-denominated senior offering was the first local currency notes to be placed overseas. It was also the first investment grade non-sovereign issuance out of Colombia.

Perhaps a more important first, however, is the strength of Emegsa's covenants. With no guarantee and no security, the issuer was still able to borrow from its Chilean parent's covenants, allowing it to finance on terms not normally achieved by a Colombian issuer. The highlight was a change of control clause which also requires a ratings downgrade to be triggered, a gold standard for any issuer.

Chadbourne & Parke was counsel to the issuer with Gómez-Pinzón Zuleta Abogados providing local law advice. The underwriters were served by Davis Polk & Wardwell as international counsel and Prietocarrizosa as Colombian counsel.

ICE
Costa Rica was another country to see its first rule 144A offering last year. The lack of precedent for the $250 million issuance by government-run power company Instituto Costarricense de Electricidad (ICE) created a myriad of tax and structural issues to be worked through with the local securities regulator.

It also required great emphasis on disclosures and explanation of accounting principles to which the international investment community is not accustomed

ICE was represented by White & Case. The underwriters were advised by Milbank Tweed Hadley & McCloy as international counsel and Consortium – Laclé & Gutiérrez as local counsel.

ITT notes offering and tender offer
ITT's debt offering in September marked the final stage of a broader restructuring and re-capitalisation exercise, but the complexities of its $1.85 million multi-tranche issuance makes the deal worthy to include in this section.

Having subsidiaries issue notes and dividend the funds up the capital structure is not an unusual debt management exercise, but in ITT's case the two issuing subsidiaries were newly created and in the process of being allocated ITT businesses. The lack of financial history complicated the offering document disclosures and projections, as did the concurrent registration of the subsidiaries' shares.

Simpson Thacher & Bartlett acted as issuer's counsel and Davis Polk & Wardwell represented the underwriters.

Minerva convertible debentures
2011 was a tough year for convertibles, yet lawyers on Minerva's issuance pulled together a deal that would have been impressive even in good times. The issuer placed R$200 million floating rate convertible debentures with local and international investors. It marked the first public offer of convertible securities in Brazil, and the first international convertible offering to come out of Brazil.

The deal's lawyers had to work through first-of-its-kind issues with the local securities regulator and accountants regarding the notes' treatment as debt or equity, and combine features that satisfied Brazilian and international standards.

White & Case served as international counsel to Minerva, with Pinheiro Neto advising on Brazilian law. The underwriters were represented by Linklaters and Lefosse Advogados on international and local law, respectively.


Equity: Nielsen IPO

L-R: Chi Pan of Simpson Thacher, Danielle Myles of IFLR

The IPO market had been less than stellar heading into 2011, especially for private equity holders. Attorneys credit Nielsen Company's $1.89 billion IPO last January for reigniting the market. At the time it was the largest private equity-backed IPO in US history. HCA surpassed that position a couple months later.

The truly innovative part of Nielsen's IPO was the inclusion of a simultaneous convertible bond offering, never done by a foreign company investing into the US. The offering of mandatory convertible subordinated bonds targeted a different type of investor allowing for Nielsen to raise an additional $250 million.

Nielsen was represented by Simpson Thacher & Bartlett in the US and Clifford Chance in Amsterdam. Cahill Gordon & Reindel counseled the US underwriters, and Loyens & Loeff was counsel for the underwriters based in Amsterdam.

Runners-up

AIG re-IPO
The US government received a lot of criticism for using taxpayer money in its $85 billion bailout of AIG. The merit of this deal was thus inevitably dependent on the US Treasury recovering an amount per share at least as large as the price it paid in 2008. It did just that in the public offering of 300 million AIG shares (200 million via the Treasury and 100 million offered by AIG) at approximately $29 per share for a grand haul of approximately $8.7 billion.

AIG was already a publicly traded company with ongoing disclosure requirements, meaning it didn't want too much information revealed to the public at the risk of affecting the price of existing shares.

Davis Polk & Wardwell advised the US Treasury and Sullivan & Cromwell acted for AIG on the issuers' side of things. The underwriters were represented by Cleary Gottlieb Steen & Hamilton.

Delphi IPO
AIG's re-IPO isn't this category's only contender involving shares purchased by the US government. Delphi Automotive, a former branch and major partner of General Motors, used a novel drag along deal structure that required all holders to sell a pro-rata amount of shares in its $530 million IPO last November.

Before Delphi could offer the shares, it had to clean up its capital structure, which had been complicated by US government ownership through the Pension Benefit Guaranty Corporation. Delphi shares also had to be repurchased from GM and a myriad of hedge funds. This enabled a single class of equity to be offered to the market using a lock-up and partnership agreement.

Davis Polk & Wardwell advised Delphi Automotive in its issuance of shares and Skadden Arps Slate Meagher & Flom represented the underwriters. Carey Olsen acted as Jersey counsel for Delphi Automotive.

Fibra Uno Reits
This $300 million fibra (the Mexican term for a real estate investment trust) offering came off the heels of a 10-year legislative push to introduce the structure into Latin America. And this was the first. A new set of laws on the management and disclosure of fibras, combined with taxation issues, added to the difficulty of this precedent setting offering.

Mexican law requires Reits to be outside managed, meaning the Reits management company had to be a type of subsidiary. At the same time they needed to be structured so that returns were considered active income for US tax purposes.

Milbank Tweed Hadley & McCloy acted as US counsel and Robles Miaja acted as Mexican counsel to the initial purchasers, Banco Santander and Evercore Group. The issuer was represented by Clifford Chance in the US and Thompson & Knight in Mexico.

HCA Holdings IPO
HCA Holdings completed the largest private equity backed IPO in US history in March 2011 for a whopping $4.35 billion. The offering involved a huge underwriting syndicate, with one of the underwriters being affiliated with an owner of HCA. Finra concerns inevitably followed, and Merrill Lynch's one third ownership of HCA certainly complicated things.

The offering was approved by the SEC in 2010, but HCA decided to hold off until market conditions improved.

Simpson Thacher & Bartlett was counsel to HCA and Cahill Gordon & Reindel represented the underwriters. Bass Berry & Sims and Winston & Strawn acted as healthcare regulatory counsel.

Mosaic spin-off
Mosaic's $7.5 billion secondary offering of common shares followed its $24 billion spinoff from Cargill, the largest private company in the US. A unique set of circumstances in which Cargill's largest shareholder passed away leaving Mosaic shares to a group of charitable trusts threatened Cargill's status as a private company. To avoid tax and disclosure implications, Cargill did an abnormally large high vote re-capitalisation whereby Mosaic shares were sold to a new class of Cargill shareholders. The spin-off of Mosaic followed and was ruled tax free by the IRS.

The charitable trusts, in need of liquidity, then sold Mosaic shares in one of the largest ever secondary offerings of a non-financial institution, with the remainder of Mosaic shares being sold via a three year lock-up scheme.

Simpson Thacher & Bartlett acted as counsel to Mosaic's Special Committee of the Board of Directors and Fried Frank Harris Shriver & Jacobson represented Cargill. The charitable trusts were represented by Loeb & Loeb, and Cravath Swaine & Moore advised the book running managers.


High yield: CIT notes offering and exchange offer

L-R: Inosi Nyatta of Sullivan &?Cromwell, Danielle Myles of IFLR

Last year CIT employed some clever techniques to rid itself of the highly restrictive covenants contained in its Series A notes, which had been issued upon its emergence from bankruptcy in 2009. An exchange offer for new Series C notes incentivised investors through call protection over Series A notes, but with an otherwise similar return. Cleverly, a $2 billion benchmark offering of these notes was made three months prior to establish a market for the new notes. On top of that, the unregistered exchange offer was partnered by, not built into, a separate consent solicitation, to ensure all investors were offered the same terms, as required by the indenture. At its close this became one of the largest exchange offers ever, and showed some different ways to shake off post-bankruptcy covenant restrictions.

Sullivan & Cromwell served as issuer's counsel and Cahill Gordon & Reindel acted for the managers.

Runners-up

Chrysler Group
The $3.2 billion high yield offering by the Chrysler Group last May was a crucial component of the company's $7.5 billion refinancing, which allowed it to repay its Tarp obligations six years ahead of schedule. Coordinating a high yield deal with a term loan, revolving loan, and an equity investment by new affiliate Fiat in the 2011 bond market, and for a deal of this size, was no easy feat.

An auto company issuing high yield debt is somewhat of a novelty. The restrictions of traditional high yield covenants don't sit well with the sector's alliances, but to raise the amount of money required, Chrysler had little choice.

Sullivan & Cromwell and Willkie Farr & Gallagher advised the issuer. The managers were represented by Cravath Swaine & Moore.

CityCenter Las Vegas refinancing
The $1.5 billion raised by CityCenter in the high yield market last year rescued its Las Vegas-based construction project, which was teetering on the verge of bankruptcy. But the complications along the way are what earn this transaction its nomination for IFLR's inaugural high yield deal award.

The deal lawyers had to negotiate with the existing lenders' workout lawyers, work around squabbling JV parties, deal with an unfinished building that had failed inspection tests, completion guarantees, and no financials to disclose to investors.

Cahill Gordon & Reindel advised the initial purchasers, Gibson Dunn & Crutcher acted for CityCenter and Mayer Brown was counsel to the credit facility lenders. Paul Hastings was counsel to JV partner Dubai World.

Kinetic Concepts
The leveraged buyout of Kinetic Concepts was closely watched by the market. It was applauded for closing at a very difficult time in the high yield market, and for featuring the biggest secured debt package among post-crisis LBOs (at $6.3 billion). But it earns its nomination for some lesser known aspects of the $2.5 billion high yield component of the acquisition financing.

The buyer required a key business of the target to be spun off to another part of the group prior to the acquisition.

Kinetic Concepts was represented by Skadden Arps Slate Meagher & Flom. Cahill Gordon & Reindel acted for both the initial purchasers and the lead arrangers. The acquiring consortium was served by Kirkland & Ellis on the financing and Simpson Thacher & Bartlett on the acquisition. The consortium was controlled by Canadian Pension Plan Investment Board and Public Sector Pension Investment Board, counseled by Torys and Weil Gotshal & Manges respectively.

OGX Petróleo e Gás Participações
It's not often that a high yield lawyer gets to work for a pre-production and pre-cashflow issuer, but that was the situation for the four firms on OGX's $2.6 billion offering last May. What's more, in the months preceding the issuance, OGX reported lower oil reserves than expected and pushed back its first production date. Despite this, the unsecured deal placed without delays.

A key challenge was structuring a covenant package for an issuer not yet generating Ebitda, and which allowed an ambitious, developing company to grow.

Davis Polk & Wardwell and Mattos Filho Veiga Filho Marrey Jr e Quiroga Advogados were international and local counsel to the issuer respectively. White & Case and Machado Meyer Sendacz e Opice Advogados served in the corresponding roles for the underwriters.

Warner notes offering, consent solicitation and tender offer
Throughout its takeover by Access Industries last year, Warner Music succeeded in keeping $1.1 billion of secured high yield notes outstanding. While the target's other three outstanding note series were refinanced through a tender offer and $1.1 billion worth of new notes, it made economic

sense not to refinance the secured tranche. A consent solicitation to permit the acquisition, and new tranches and credit facilities that complied with the outstanding tranche's restrictive covenants, would have been difficult in any market. So the deal completing in July makes it all the more

The issuer was represented by Paul Weiss Rifkind Wharton & Garrison, Davis Polk & Wardwell advised the managers and initial purchasers, and Debevoise & Plimpton acted for Access Industries.


M&A: Rockstar Bidco/Nortel Networks’ patent portfolio

L-R: Peggy Brown of Skadden, Peggy Tirrell of EMC Corp, Joseph Pasquariello of Goodmans, Cheryl Slusarchuk of McCarthy Tetrault, Scott Parel of Weil Gotshal, Menachem Kaplan of Paul Weiss, Eric Webber of Irell & Manella

This consortium acquisition of Nortel Network's patent portfolio for $4.5 billion was the largest patent auction in history, and involved the sector's major players. Ericsson led the consortium including Research in Motion (RIM), Apple, Sony, Microsoft and EMC Corporation to secure an unlikely victory over cash-heavy Google in this patent war battle.

The key to the deal was the consortium's unique, yet simple structure. To encourage more parties to join the group and provide much needed cash, a system was devised whereby parties stated what patents they wanted, and were given what amounted to tickets based on their cash contributions. Distribution of the patents would be based on the ticket allocations. After Apple jumped on board in the final rounds of bidding, the consortium walked away with the most sought after assets to come out of the Nortel bankruptcy.

Runners-up

ArcelorMittal and Iron Ore Holdings/Baffinland Iron Mines
Nunavut Iron of Iron Ore Holdings, backed by US private equity firm Energy and Minerals Group, made an unsolicited take-over bid for Baffinland Iron Mines at $0.80 per share in September 2010. The hostile offer could have meant subordinated shares for Baffinland investors, so a white knight was needed. ArcelorMittal offered $1.10 per share a couple months later, and a bidding war was underway.

After months of counteroffers and two hearings before the Ontario Securities Commission (OSC), regarding Baffinland shareholder rights plans, the bidders joined forces and acquired Baffinland for $590 million –$1.50 per share (almost twice as much as the original offer). The acquirers' weren't through with the OSC, though. Nunavut already owned some Baffinland shares which needed to be converted into common equity.

Braskem/Dow Chemical polypropylene business
Brazil's largest petrochemical company, Braskem, acquired Dow Chemical Company's four polypropylene factories last September for $323 million. The catch was that Dow's polypropylene units were located right in the middle of its other businesses which were to continue operating under Dow. In a sector with such sensitive intellectual property concerns, this required carefully structured protections. The solution came in the form of over 40 ancillary documents regulating the day-to-day operations of the businesses, with provisions allowing for future collaboration.

Grupo Sura/ING Latin American businesses
Grupo de Inversiones Suramericana's (Grupo Sura) acquisition of ING's Latin American pensions, life insurance and investment management operations for $3.8 billion was the largest ever acquisition by a Colombian company, and the largest ever exclusively Latin American cross-border M&A deal.

To finance the acquisition, the Colombian pension fund raised $1.82 billion in the largest ever Colombian share issuance and made special financing arrangements with UBS including a syndicated loan, equity investment and a preferred stock issuance.

Innovation didn't end with the sheer size and complicated financing of the deal, though. Mexican laws on the establishment of foreign financial institution affiliates needed amending to allow for assets to be held in special purpose vehicles across Holland, Spain and Colombia.

Harbin Electric take-private
China-based Harbin Electric, which had listed on the Nasdaq via a reverse triangular merger in 2005, achieved a 186% premium per share in its $754 million sale to Harbin Chairman & CEO Tianfu Yang.

Last year's negative publicity surrounding Chinese reverse mergers caused extreme volatility in Harbin's trading price and made it difficult for Yang to secure financing from China Development Bank. And when Harbin shareholders wouldn't agree to a deal until Yang secured financing, a stand-off followed.

The solution came in the form of a provision which was drafted to give Harbin's Special Committee of the Board of Directors the exclusive ability to unwind the deal if financing couldn't be secured, giving shareholders the confidence needed to sell.

Sanofi-aventis/Genzyme
Sanofi-aventis's hostile acquisition of Genzyme for $20.1 billion involved a complicated contingent value right (CVR) based on the performance of a new drug in development by Genzyme. French pharmaceutical company Sanofi-aventis and Boston based Genzyme had greatly differing opinions on the value of Genzyme's yet to be released drug, so they used a CVR to set performance milestones which, if and when were satisfied, would result in an additional $3.8 billion for shareholders.

A further complication was the hostile takeover being litigated in the state of Massachusetts. There are few precedents in this jurisdiction, which increased uncertainties.


Private equity: Berkshire Partners and OMERS/Husky International

L-R: Scott Parel of Weil Gotshal, Chantal Thibault of OMERS Private equity, David Tennant of McCarthy Tetrault, Daniel J Bursky of Fried Frank, Stuart H Gelfond of Fried Frank

Canadian pension fund OMERS Private Equity teamed up with US-based private equity fund Berkshire Partners in the C$2.1 billion acquisition of Husky International from Onex Corporation. This was the largest private equity acquisition of a Canadian company last year. The deal is expected to signal the beginning of a trend in US and Canadian joint acquisitions. There were never-before-seen complications arising from the cross-border nature of the buyers, and the team also had to find a way for the pension fund to hold the assets in accordance with exchange controls and investment criteria.

Berkshire and OMERS were represented by McCarthy Tétrault in Canada and Weil Gotshal & Manges in the US. Onex and Husky were represented by Torys in Canada and Fried Frank Harris Shriver & Jacobson in the US. Simpson Thacher & Bartlett acted for JP Morgan Securities and Evercore Partners as financial advisors to Sanofi-aventis.

Runners-up

Mirae Asset Private Equity and Fila Korea/Acushnet
The acquisition of Acushnet, a golf equipment manufacturer, from Fortune Brands by Mirae Asset Private Equity and Fila Korea represents the first move by a Korean private equity fund to acquire a leading global brand. Korea Development Bank and the National Pension Service of Korea financed the deal, making the buy-side completely Korean. This deal is understood as a great source of pride for South Korea and a symbol of things to come. Some bidders expressed concern over potential environmental and intellectual property litigation, but the Mirae and Fila team agreed to take on all risk in this regard. So far, it seems it was a good gamble.

McDermott Will & Emery represented Fila and Mirea, and Chadbourne & Parke acted for Fortune Brands.

Samson Investment buyout
The acquisition of Samson Investment Company is another data point in last year's trend of private equity firms teaming up with strategic acquirers. A consortium led by KKR and including Natural Gas Partners and Crestview Partners needed third party equity to fill the gap between high yield, bank credit and bank equity financing in their buyout of the target.

Japanese trading company ITOCHU joined the consortium and Samson was acquired for $7.2 billion in the largest private equity deal since 2007. Strategic companies and private equity firms typically have different timeframes and partnership agreements in mind when making these types of acquisitions, which complicated setting the terms of the consortium. The deal is representative of the increasing importance of Japanese investors in the marketplace, especially under a strong Yen.

Millbank Tweed Hadley & McCloy served as counsel to ITOCHU. For the private equity consortium members, Simpson Thacher & Bartlett represented KKR, Davis Polk & Wardwell represented Crestview and Latham & Watkins represented NPG. Cahill Gordon & Reindel acted for the financiers, and Jones Day advised Samson.

TMM Holdings/Taylor Morrison and Monarch Homes
The acquisition of Taylor Morrison and Monarch Homes, both north American subsidiaries of UK-based Taylor Wimpey, is another example of private equity funds teaming up to bolster their buying power in a recovering market. US-based TPG Capital and Oaktree Capital Management, along with Canadian fund JH investments, established a limited partnership, TMM Holdings, to acquire the homebuilders for $1.15 billion last July.

It was an all equity deal with a portion sponsored through bridge financing, which is unusual for a transaction of this size. This, along with the absence of a reverse breakup fee and equitable remedies, gave Taylor Wimpey some comfort that the deal would close. It did, but not without having to be approved by Canadian, US and European Commission regulators.

The acquirers were advised by Paul Weiss Rifkind Wharton & Garrison. TPG capital was represented by Ropes & Gray in the US and Stikeman Elliott in Canada. Debevoise & Plimpton acted for Oaktree Capital and McCarthy Tétrault was on for JH Investments. Cravath Swaine & Moore represented lenders to the acquirers. The sellers were represented by Davis Polk & Wardwell in the US and McMillan in Canada.


Project finance: Embraport

L-R: Victor DeSantis of White & Case, Robert A Ripin of Hogan Lovells, Patricia Scharlau of Machado Meyer, Daniel Laudisio of Souza Cescon, Daniel Calhman de Miranda of Mattos Filho, José Luiz Homem de Mello of Pinheiro Neto, Randall Guynn of Davis Polk

Brazil's export boom has left its ports in desperate need of development. Embraport, a greenfield private terminal in the country's busiest port in Sao Paulo, has paved the way for further investment in this sector through its unprecedented financing arrangement.

The $786 million brought together for the first time three of the region's biggest lenders (the Inter-American Development Bank (IDB), BNDES and Caixa Econômica Federal) and showed how to satisfy each of their policy requirements.

A multi-tranche and dual currency deal was negotiated which allowed IDB and BNDES to have separate loan agreements.

Marrying the two financings created first-of-its kind intercreditor issues, the resolution of which greatly increases the possibilities for large-scale financings in Brazil. One key intercreditor issue was IDB's commercial B lenders' hedge providers sharing collateral on a parri passu basis. This marked the first time that BNDES has agreed to this.

Runners-up

Juan Santamaria International Airport
The restructure and refinancing of Costa Rica's international airport involved a distressed debt acquisition, refinancing of an existing loan, renegotiation of a concession, and a new financing. The deal closed in September after three years of negotiations on four fronts.

When the lawyers got involved they faced the first failed public concession in Costa Rica, and banks that had exercised their step in rights.

Simpson Thacher & Bartlett was counsel to the borrower and sponsor. The lenders received US law advice from Clifford Chance and local advice from BCM Abogados. The project sponsors were served by Azevedo Sette Advogados as Brazilian counsel and Ogilvy Renault as Canadian counsel.

OSX 2 floating production and offloading vessel
Amid the many Brazilian drillship financings of late, this deal by OSX stands out for not being backed by an upfront and long term Petrobas charter. Instead, OSX 2 will be chartered by another Eike Batista group member OGX, which is pre-production and pre-cashflow.

There were a number of bankability issues: the charter was not yet fully embedded on the market; OSX 1 had already been delivered and was ready for first production, and; the construction had not yet begun meaning the project carried full construction risk.

Allen & Overy represented the sponsors with the lenders advised by White & Case on US law and Souza Cescon Barrieu & Flesch on Brazilian law.

PR-22 and PR-5 concession
With the backdrop of a developing public private partnership (P3) market, and after some high profile brownfield P3 failures, the concession of Puerto Rico's PR-22 and PR-5 toll roads is important in showing that well structured project privatisations can be done in the US.

The $1.1 billion deal was the US's first brownfield P3 in five years, the first north American post-crisis project to carry full traffic risk, and the first project under Puerto Rico's P3 programme.

The borrower retained Freshfields Bruckhaus Deringer as international counsel and McConnell Valdés as Puerto Rican counsel. Milbank Tweed Hadley & McCloy and Adsuar Muñiz Goyco Seda & Pérez-Ochoa acted in corresponding roles for the lenders. Allen & Overy was international counsel to Puerto Rico's Highway and Transport Authority and Pietrantoni Mendez & Alvarez was local counsel.

Russell City Energy Center
The Russell City Energy Center overcame opposition and stringent approval requirements, and a shaky start for its majority sponsor, to close last June, four years after its first contact was executed.

The project's biggest hurdle was the community challenge and litigation against the granting of its air quality permit.

White & Case acted for the sponsor and Latham & Watkins for the lenders.

Taboada Wastewater Treatment Plant Project
The financing of Peru's Taboada Wastewater Treatment Plant builds on IFLR's America's 2011 project finance deal of the year, the Huascacocha hydroelectric project, but required adjustments to the government payment scheme to accommodate multiple projects, made this a more difficult deal to pull off.

The issuer retained Chadbourne & Parke as US counsel and Estudio Ávila y Abogados as local counsel. DLA Piper and Rubio Leguía Normand acted in corresponding roles for the arranger and initial purchaser. Maples and Calder advised on Cayman Island issues and Hogan Lovells acted for the indenture trustee.

Zapallal – Trujillo Transmission Line
The $160 million financing of the transmission line connecting Zapallal to Trujillo in Peru used a trust structure, rather than an SPV, for the first time in the country. Using trusts allowed the sponsor to isolate project risks and not jeopardise its bonds and corporate AAA rating.

Estudio Santivañez Abogados represented the concessionaire and Estudio Echecopar acted for the lenders.


Restructuring: Angiotech Pharmaceuticals

L-R: Lisa Kraidin of Allen & Overy, Joseph Pasquariello of Goodmans, Jeremy Dacks of Osler Hoskin, Shaunna Jones of Willkie Farr, John Grieve of Fasken Martineau, Pam Bopari of Alvarez & Marsal

The key to the $600 million restructuring of Angiotech Pharmaceuticals was having the proceedings carried out in Canada under the Companies' Creditors Arrangement Act (CCAA), with a simultaneous filing under Chapter 15 in the US. Angiotech is based in Vancouver but 80% of its assets are held in the US. Having the lead proceedings in a Canadian court allowed for the lightest possible touch of reorganisation and the best outcome for shareholders.

The transaction involved an in-court CCAA restructuring of subordinated notes and a concurrent out-of-court exchange offer of floating rate notes with limited voting rights. This was a first in Canada and it is expected to become a precedent. US courts were thought unlikely to approve this aspect of the plan, and though the senior noteholders challenged this in the Canadian courts, they eventually settled allowing Angiotech to emerge from bankruptcy in May.

Runners-up

Caribbean Petroleum
In 2012 Caribbean Petroleum filed for bankruptcy under US Chapter 11 following its liquidity crisis caused by an explosion at its Puerto Rican facilities a year earlier. Making matters worse, the EPA had ordered the company to shut down its remaining tanks, meaning it had no operational income to pay a seemingly endless number of tort and debtor claims. The company obtained debtor-in-possession financing from Banco Popular de Puerto Rico receiving approval for a section 363 auction of its assets.

One problem remained: Caribbean had franchise agreements with up to 80 service stations, meaning any purchaser would have to agree to terms with each service station operator. A bankruptcy court decision allowed for the rejection of those franchise agreements, paving the way for Puma Energy Caribe to purchase substantially all the Caribbean assets.

Graceway Pharmaceuticals
Substantially all the assets of Graceway Pharmaceuticals were acquired by Medicis Pharmaceutical Corporation in a stalking horse auction for $455 million, up from an intial bid of $275 million by another company. The sale could not have happened if not for the innovative idea to apply to the Ontario Superior Court for an appointed receivership.

Medicis wanted vesting order certainty in its acquisition of Graceway assets, which could have been granted under the Canadian or US bankruptcy regimes if not for the fact that Graceway's Canadian subsidiary had been providing debtor in possession financing for its US parent. The solution was to appoint a Canadian receiver for the sole purpose of giving the court oversight of the sales process. This protected stakeholders in Graceway's Canada subsidiary, and allowed for a vesting order. A receiver had never been used to facilitate a cross-border sales process before.

Napcus
North American Petroleum Corporation (Napcus) wanted to emerge from Chapter 11 protection as a private company to escape costly disclosure requirements for trading its shares on US and Canadian exchanges. An innovative restructuring plan valued at over $100 million was developed in coordination with an equity committee which allowed Napcus to remain under US and Canadian public company shareholder thresholds, with a back-up plan to return to public company-status when it had the cash reserves to do so.

This plan divided existing shareholders into two classes, with one receiving shares when the plan took effect and the other receiving a delayed distribution of shares or cash equivalent. This gives Napcus the time it needs to generate cash for public company disclosure requirements, or pay the delayed distribution shareholders. The plan was approved in September, and left Napcus with cash reserves.

South Edge
The South Edge joint venture brought together eight homebuilding companies to create Inspirada, a real estate project outside of Las Vegas. The project had been stalled since the 2008 subprime mortgage crisis, and with the loans being off the joint venture parties' balance sheets, there was little incentive for the homebuilders to act.

Rather than commencing an arduous foreclosure process for modest returns, the secured lenders – JPMorgan Chase, Crédit Agricole Corporate and Investment Trust and Wells Fargo – took the unusual move of filing an involuntary bankruptcy petition against the homebuilders.

Travelport
This $3.8 billion restructuring of Travelport included a complicated out-of-court backup prepackaged reorganisation plan which encouraged lenders to extend the maturity date of $715 million in unsecured payment in kind loans, some of which were split into two debt tranches.


Structured finance and securitisation: BNP Paribas/Janus protected series

L-R: Francesco Noero of BNP Paribas, Doug Sue of BNP Paribas, Steven Lofchie of Cadwalader, Nick Gao of BNP Paribas

A derivative developed by BNP Paribas enabled mutual fund Janus to offer retail investors growth potential and a degree of downside protection they had never seen before. The deal made Janus Protected Series – Growth fund the first US-based capital protection mutual fund to offer daily liquidity and be open-ended.

The key to the downside protection is the strike price moving up in accordance with the most recent NAV, offering protection at 80% of the previous figure. Offering retail investors this type of certainty and over a 10-year term was totally new, though since its launch last May, it has been replicated by others in the market. Offering increasing amounts of protection (up to $1.5 billion) over such a long-dated deal complicates the hedging required of the derivative provider – perhaps a reason why it hasn't been done before, but BNP had the expertise to do this.

Cadwalader Wickersham & Taft represented BNP Paribas and K&L Gates acted for Janus.

Runners-up

CapOne forward sale
Capital One's acquisition of ING's US operations, ING Direct, has been hailed an encouraging sign for the region's M&A market. Less known, but just as interesting, is the efforts needed to secure sizeable and certain financing for a bank in last year's choppy debt markets.

The acquirer knew it needed to issue equity as part of the capital structure, but the August volatility was fast approaching. To achieve certainty of execution and within set price parameters, the solution was a forward sale of 40 million shares for $2 billion. This was one of the largest issuer forwards ever executed, and certainly the largest in some time and for a financial institution.

Further rarities were it being a post-paid deal and a Goldman II deal. With capital requirements bearing down on banks, the deal has been tipped as an example of how to raise equity with maximum certainty.

Gibson Dunn & Crutcher acted for the issuer. Morrison & Foerster was counsel to the underwriters and dealers on the forward.

Desjardins' global covered bond programme
Last March Canada's Caisse centrale Desjardins du Québec became the first credit union in north America to complete a covered bond deal. Establishment of the €5 billion programme and its first $1 billion issuance needed a structure that accommodated the mortgages being held by dispersed caisses. A two-step loan sale structure was needed to bring the mortgages into the SPV issuer, along with corresponding double cash-flow, servicing and maintenance mechanisms. Perfecting these flows was needed for investor confidence and approvals, and despite the mortgages being isolated in Quebec rather than diversified around the country like most covered bond pools, the deal was a success.

Cleverly, the lawyers structured the deal to comply with Bank Act restrictions imposed on bank covered bond programmes. Even though Derjardins is not subject to these restrictions, complying with collateral and mortgage requirements helped the deal achieve a bank-like rating.

The issuer's US counsel was Mayer Brown with McCarthy Tétrault acting as Canadian counsel. Allen & Overy provided US advice to the managers and Osler Hoskin & Harcourt advised on Canadian law.

Fovissste MBS
Fovissste's $450 million mortgage-backed securitisation in August is well-known in the market, and for good reason. The issuance by Mexico's state-sponsored mortgage provider was the country's first government cross-border MBS without a third party guarantee. It's also a rarity to see international MBS from a Latin American issuer – the region's securitisation markets are predominantly domestic. Mexico's real estate market has had similar woes of the US, so a secondary market offering by a debut issuer is also impressive.

Perhaps the most notable elements of the deal, however, stem from the issuer. Six years ago Fovissste was plagued by allegations of corruption, inefficiency and bureaucracy. For it to close this deal with no third party enhancement is laudable.

The deal saw Chadbourne & Parke advise the issuer with White & Case acting for the manager.

PowerShares DB Inflation/Deflation ETNs
Deutsche Bank closed 2011 by launching an innovative ETN which transforms inflation from an economic concept to an asset class. Together with PowerShares, Deutsche issued two ETNs linked to US inflation expectations. These ETNs go a step beyond Treasury Inflation Protected Securities (TIPS), which are often used to gain exposure to inflation, by removing interest rate risk from the returns.

Deutsche Bank was advised by Davis Polk & Wardwell.

VelocityShares/Credit Suisse VIX ETNs
Credit Suisse started 2011 with the NYSE Arca bell ceremony for its VIX-related ETNs, It turned out to be a good year to introduce a programme based on the volatility index for the Chicago Board Options Exchange. Created by VelocityShares, the programme's notes include the first to offer double exposure on volatility and the first inverse volatility product. The deal is pioneer for 2xleveraged ETNs, and is now among the most liquid ETNs traded in the US.

Davis Polk & Wardwell acted for Credit Suisse, and Cadwalader Wickersham & Taft for VelocityShares.


 


 

 

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