Magazine article American Banker

Morgan Garners Return on Stock Issues

Magazine article American Banker

Morgan Garners Return on Stock Issues

Article excerpt

Timing for hefty returns, J.P. Morgan & Co. is putting its best talents to work in Mexico, bringing to market equity issues for Mexican companies.

The reason for this labor is obvious. While even the most lucrative fees for structuring and placing debt issues are normally less than 1%, fees for equity placements frequently exceed 4%.

Volume is also on the rise. Mexican corporations issued around $3.5 billion in equity last year, up from virtually no activity in 1990.

The red-hot pace of new stock issues is driving Mexico's growth rates into competition with countries in the Pacific Rim, observers noted.

"Mexico's stock market rose over 100% in dollar terms last year," said Peter Bernard, managing director for Latin American corporate finance at Morgan.

The push into equities comes as bond underwriting activity has grown somewhat less attractive, owing to intensifying competition and falling bond yields.

Interest rates on bond issues have tumbled to around 7% currently, from near 18% at mid-1990, partly in response to Mexico's steadily improving credit ratings.

Last October, in its biggest equities deal to date, Morgan advised Valores de Monterrey SA, the Mexican insurance group, on the acquisition of a 51% take in Bancomer, Mexico's second largest bank, for $2.55 billion.

Morgan also arranged a $1 billion syndicated international loan to finance the Bancomer transaction.

In smaller and less publicized deals, the bank privately placed $190 million in equity for Cemex, the Mexican cement company. …

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