Colombia: Equity issuance moves into boom period

Two major state companies will be partly privatized and up to 10 private companies are expected to undertake initial public offerings in Colombia next year.
Some 20% of the equity of the country’s leading state oil producer, Ecopetrol, will be listed. According to Bogotá stockbroker Suvalor this stock issue will be valued at $5 billion.
In addition, some 20% of the country’s leading state energy transmission company, Isagen, will be privatized, valued at $200 million (some 30% of Isagen’s equity has already been listed).
A programme undertaken by the Bogotá stock exchange, called Colombia Capital, is also helping several small companies to gear up to listing on the stock market for the first time. These include paper producer Carvargal, vegetable oil maker Alianza Team, and dairy products maker Alqueria.
Camila Pérez Marulanda, head of economic research at Suvalor, says: “There are several factors that are making the Colombian stock market more attractive to foreign investors. One of them is the country’s economic stability. Another is new corporate governance regulations which have led many of the country’s leading companies to become more transparent.
“The programme, Colombia Capital, is providing a lot of important support to small firms wishing to list for the first time. Furthermore, the Inter-American Development Bank is heavily subsidizing the investment banking fees for these companies wishing to list.”
Elizabeth Praga, manager of Colombia Capital, says: “Our organization is helping 47 Colombian small and medium-sized companies to move towards a stock market listing. It is also assisting some 250 companies that want to issue bonds and commercial paper.
“We are training company executives on the functioning of the stock market and guiding them through the whole process of doing an IPO.”
Alberto Gutierrez, president of Titularizadora Colombiana, the country’s equivalent of Fannie Mae, says: “Low inflation and low interest rates have helped to develop capital markets markedly in the country in recent years. For the first time in the country’s history, we have just securitized fixed-rate mortgages.”
During the past four years, Titularizadora Colombiana has undertaken securitizations valued at $2.5 billion and, in November, did securitizations for mortgages fixed at 8.5% over a 15-year term, valued at a total of $300 million.
Moreover, the government is considering a further financial services law, expected to be implemented this year, that would allow banks to more easily become involved in other sectors, including leasing, corporate finance, and brokerage.
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“Banks can set up affiliates in some of these areas at the moment, such as brokerage, but the new law would allow them to become directly involved in these sectors,” says Pérez Marulanda.
Recent free-trade agreements have allowed foreign banks to set up shop in Colombia for the first time. HSBC now has a big presence in the country through its $1.7 billion purchase of Panama’s Banistmo, which has an important Colombian arm. The UK bank made the acquisition last July.
GE Finance is also expected to enter the Colombian market next year.
Juan Cabrera, senior director of investment bank Duff and Phelps in Colombia, says: “The stock market has been very volatile over the past decade. It rose considerably between 1991 and 1997 but then dropped between 1998 and 2002 during Colombia’s economic crisis.
“There are around 40 companies listed on the market but only 12 stocks are actively traded.”