Exactly one year ago I anticipated that, despite the global economic downturn, we would see a spur of equity offerings in Peru as a way to raise capital by Peruvian companies and as part of exit strategies for hedge funds and private equity houses that have invested in Peruvian companies. I also anticipated that we would see a flow of debt offerings in the international markets in 2011 most of which would likely be high yield bonds.
As a matter of fact, it turns out that these predictions were partially true for Peruvian companies. Despite the Pesquera Exalmar initial public offering in late 2010, not as much real activity was seen in the Peruvian local equity markets as may have been expected. A number of transactions were put on hold as a result of the elections in April 2011 and the capital markets did not actually pick up until late in the year.
In fact, since late 2010, only one company, Cementos Pacasmayo, one of the largest cement producers in Peru, conducted an NYSE-listed equity offering partly for strategic reasons and primarily due to the size of the deal. Unfortunately, no new companies conducted public equity offerings in Peru during 2011 but a number of potential offerings have been worked on since last year and will hopefully enter the market later this year.
On the debt side, it was in fact confirmed that the needs of larger companies in Peru have, to an extent, outgrown the local securities market in Peru. Towards the end of 2011, a number of mining, retail and financial services companies successfully tapped the international markets and obtained favorable financial conditions and, in most instances, offerings were many times oversubscribed. For instance, Volcan Compañía Minera was able to issue $600 million in 5.375% notes with a 10-year maturity in terms that are significantly more favourable that it would have been otherwise been able to obtain in the local market.
Luckily, most Peruvian companies have been able to escape restrictive high-yield covenants, in part thanks to the fact that Peru has not only been able to maintain an investment grade credit rating but last year was upgraded a notch from BBB- to BBB. This upgrade reflects the view of reduced uncertainty regarding macroeconomic policy continuity under President Ollanta Humala's administration and will have a significant effect on the capital-raising strategies for Peruvian companies in the international capital markets.