Dealmaker Q&A

Posted on

Content available in English and Spanish (scroll down)

TTR DealMaker Q&A with Auriga Global Investors Partner Diego Garcia de la Peña

Diego Garcia de la Peña – Auriga Global Investors

Responsable de Consultoría de Coberturas a fondos de Private Equity, infraestructuras, inmobiliarios, family offices y empresas, así como responsable de Inversiones Alternativas en Deuda para corporates en Auriga. En ambas actividades, el objetivo es proveer soluciones para la estructura de capital de las empresas y ayudar a las mismas, así como a los sponsors a desarrollar sus planes de negocio. 

Anteriormente, trabajó como Structured Solutions Sales para Sponsors Financieros a nivel europeo, así como para corporates españoles en Unicredit Bank, London (2007-2011). Previamente, fue director del departamento de Ventas de coberturas de tipos de interés para la Red y Empresas en Cajamadrid y Corporate Treasury Sales en Banesto.

TTR: Estamos viviendo una de las mayores crisis sanitarias y económicas ocurridas en la historia a nivel mundial por el COVID 19, justo cuando nos encontrábamos en un buen momento para el sector de M&A y Private Equity. ¿Cómo ha afectado al sector estos meses? Y, ¿cómo va a afectar al mercado a medio plazo? 

D. G. P.: En cuanto a actividad nueva, lo que estamos viendo es una concentración en análisis de operaciones en sectores como el agroalimentario, productos básicos de limpieza, higiene y en el sector salud en general. Creemos que existe un gran volumen de dinero disponible para invertir y que los inversores están enfocando sus esfuerzos de análisis en sectores refugio o de utilidad básica. También ha una gran actividad en el sector IT y en Internet. Posiblemente haya una huida de operaciones en sector retail en general, como consecuencia de la pandemia. 

Asimismo, hay un gran número de refinanciaciones de operaciones tanto por operaciones de add-on como para aprovechar las condiciones de financiación para extensiones de plazos. En el medio plazo vemos una recuperación gradual del volumen de transacciones debido a la cantidad de capital disponible listo para invertir, pero pensamos que va a seguir la concentración en sectores básicos. 

TTR: En coberturas de tipos de interés para financiaciones de Private Equity ¿qué tendencias destacáis después de estos meses de incertidumbre? 

D. G. P.: Debido a la situación actual de tipos bajos y las perspectivas de mantenimiento de estos tipos bajos durante un prolongado período de tiempo sigue teniendo sentido empezar las coberturas forward start, tiene sentido aprovechar la coyuntura para cubrir a largo plazo y por supuesto, emplear caps como instrumento de cobertura. 

TTR: Habéis asesorado recientemente a players relevantes como EOLIA y Ergon. ¿Qué transacciones destacarías? 

D. G. P.: Eolia Renovables ha realizado la refinanciación de dos grandes portfolios fotovoltaico y eólico, en una transacción de referencia en el mercado, tanto por el tamaño de la misma y los instrumentos de financiación empleados, como por los bancos involucrados y la complejidad de toda la operación. En concreto, ha refinanciado un portfolio de parques eólicos en los que tenía la financiación bancaria con distintos bancos en cada una de las SPVs en un préstamo sindicado en una compañía holding que agrupa dicho portfolio. Y, en la parte fotovoltaica, ha refinanciado la deuda bancaria independiente que tenía en cada una de las SPVs con distintos bancos en un bono de proyecto a largo plazo por todo el portfolio con inversores de referencia institucionales y a un coste de financiación tremendamente atractivo. Auriga asesoró en la cobertura tipos de interés en la refinanciación y en la cancelación de los swaps existentes. 

Podemos destacar también el asesoramiento realizado a Ergon en dos operaciones diferentes. Por un lado, en la cobertura de tipos de interés de la financiación de la compra de Palex, la cual se estructuró mediante una compra de cap por ser el producto más adecuado. Por otro lado, el asesoramiento al fondo en la estructuración y cobertura del riesgo de divisa en la compra de la empresa italiana Millbo y la subsecuente americana Bionaturals. Una transacción muy atractiva y compleja por las denominaciones en divisa distinta del precio de compra, así como la deuda de adquisición y la necesidad de cubrir el riesgo de fluctuación de divisa entre la firma de la operación, la aprobación y el cierre definitivo de la misma. 

TTR: El sector de las energías renovables está siendo uno de los más activos en los últimos meses en el mercado de M&A y capital riesgo. ¿Se mantendrá esta tendencia en 2021? 

D. G. P.: Nosotros pensamos que este sector va a seguir estando muy activo por dos razones fundamentales. En cuanto a los activos en operación, se siguen produciendo agrupamientos de carteras y proyectos, así como refinanciaciones, como consecuencia del yield compression existente en el sector por la madurez y estabilidad del mismo. A esto tenemos que añadir que en 2021 esperamos que empiecen a financiarse muchos de los nuevos proyectos en desarrollo para su construcción y entrada en operación comercial. 

TTR: La financiación alternativa se ha afianzado en España y hemos afrontado el cambio de tendencia ¿qué nos espera en los próximos años? 

D. G. P.: Efectivamente, la financiación alternativa se ve como algo normal en España en la actualidad, tanto por el sector empresarial como por el sector bancario. Esta normalización era muy importante. Las empresas ya no ven a los fondos de deuda como financiadores oportunistas exclusivamente y los bancos los incorporan como cofinanciadores en multitud de operaciones. 

En los próximos años, esperamos un incremento de las transacciones sponsorless, ya que hasta ahora la mayoría de las operaciones de deuda alternativa han sido sponsor-driven. Con el incremento de fondos de financiación alternativa presentes en España y con la bajada de tamaño de compañía, así como con los importes de financiación mínimos para realizar las operaciones, creemos que va a haber un desplazamiento hacia operaciones sin sponsor. 

Asimismo, creemos que va a haber una mayor segmentación de las operaciones de financiación alternativa entre financiación senior bullet de crecimiento puro en compañías performing, deuda híbrida para compañías que necesiten una solución mixta de deuda-capital o financiación de situaciones especiales. 

Por último, la corriente de concentración bancaria que estamos sufriendo en España hace que la oferta se reduzca, así como que la concentración de riesgo se incremente por los dos lados. Esto va a hacer que se incrementen las necesidades de soluciones alternativas de financiación. 

Tendremos que estar atentos a la evolución de la crisis y la situación de liquidez con la que salen las empresas de la misma, con el fin de poder apoyarlas ante situaciones puntuales de estrés.

Versión en inglés

TTR: We are living through one of the biggest health and economic crises in global history because of COVID 19, just when we were in a good moment for the M&A and private equity sector. How has it affected the sector these months? And how will it affect the market in the medium term? 

D. G. P.: In terms of new activity, what we are seeing is a concentration on transaction analysis in sectors such as agri-food, basic cleaning products, hygiene and the health sector in general. We believe that there is a lot of money available to invest and that investors are focusing their research efforts on safe haven or core utility sectors. There is also a lot of activity in the IT and Internet sectors. There is likely to be a flight to safety away from the retail sector in general, as a consequence of the pandemic. 

There are also a large number of refinancing transactions both for add-on transactions and to take advantage of financing conditions for term extensions. In the medium term we see a gradual recovery in deal volume due to the amount of available capital ready to invest, but we think the concentration in core sectors will continue. 

TTR: In interest rate hedges for private equity financing, what trends do you see after these months of uncertainty? 

D. G. P.: Due to the current low rate situation and the prospects of continued low rates for a prolonged period of time it still makes sense to structure forward starting hedges, it makes sense to take advantage of the situation to hedge longer terms and of course it also makes sense to use caps as a hedging instrument. 

TTR: You have recently advised relevant players such as EOLIA and Ergon. Which transactions would you highlight? 

D. G. P.: Eolia Renovables has refinanced two large photovoltaic and wind portfolios, in a benchmark transaction in the market, both for the size of the transaction and the financing instruments utilised, as well as for the banks involved and the complexity of the entire deal. Specifically, it refinanced a portfolio of wind farms in which it had bank financing with different banks in each of the SPVs into a syndicated loan in a holding company that groups this portfolio. 

On the PV side, it refinanced the independent bank debt it had in each of the SPVs with different banks into a long-term project bond for the entire portfolio with institutional benchmark investors and at a tremendously attractive financing cost. Auriga advised on the interest rate hedging in the refinancing and on the cancellation of the existing swaps. 

We can also highlight the advisory provided to Ergon in two different deals. On the one hand, in the interest rate hedging of the Facilities for the purchase of Palex, which was structured through a cap purchase as the most appropriate product. On the other hand, advising the fund on the structuring and hedging of the currency risk in the purchase of the Italian company Millbo and the subsequent American company Bionaturals. A very attractive and complex transaction due to the different currency denominations of the purchase price, as well as the acquisition debt and the need to hedge the currency fluctuation risk between the signing, approval and final closing of the transaction. 

TTR: The renewable energy sector has been one of the most active in recent months in the M&A and private equity market. Will this trend continue in 2021? 

D. G. P.: We believe that this sector will continue to be very active for two main reasons. In terms of operating assets, there will continue to be concentration of portfolios and projects as well as refinancings, as a result of the yield compression that exists in the sector thanks to its maturity and stability. Additionally, in 2021 we expect that many of the new projects under development will start financial execution for their construction and entry into commercial operation. 

TTR: Alternative financing has consolidated in Spain and we have undergone a change of trend, what do the next few years hold for us? 

D. G. P.: Indeed, alternative financing is seen as normal in Spain today, both by the business sector and the banking sector. This normalisation was very important. Companies no longer see debt funds as exclusively opportunistic financiers and banks incorporate them as co-financiers in plenty of deals. 

In the coming years, we expect to see an increase in sponsorless transactions, as up to now most alternative debt transactions have been sponsor-driven. With the increase of alternative finance funds present in Spain and the decrease in company size, as well as the minimum financing amounts for transactions, we believe that there will be a shift towards sponsorless transactions. 

We also believe that there will be a greater segmentation of alternative financing deals between senior bullet financing for pure growth in performing companies, hybrid debt for companies that need a mixed debt-equity solution or financing for special situations. 

Lastly, the current banking concentration we are experiencing in Spain is reducing supply, as well as increasing risk concentration on both sides. This will increase the need for alternative financing solutions. 

We will have to pay special attention to the evolution of the crisis and the liquidity situation in which companies come out of it, in order to be able to support them in specific stress moments.

Dealmaker Q&A

Posted on

Specialist Insight – Análise do PLMJ das transações do setor de saúde em Portugal 

Análise de Duarte Schmidt Lino, coordenador da área de Private Equity do PLMJ, e Eduardo Nogueira Pinto, coordenador da equipa de Saúde, Ciências da Vida e Farmacêutico do PLMJ, sobre o setor.

De janeiro a agosto de 2017, o setor de Saúde, Higiene e Estética foi um dos mais ativos em transações em Portugal. Das 17 transações registradas pelo TTR, seis foram investimentos de empresas estrangeiras. O mesmo setor também está atraindo investimentos de Private Equity e está empatado com Petróleo e Gás como o mais ativo do ano.

 Quais são as condições do mercado hoje que favorecem ou que poderiam explicar essas movimentações?

Duarte Schmidt Lino- Coordenador da área de Private Equity do PLMJ

Não nos parece tratar-se de uma tendência recente ou a formar-se, mas as consequências de um crescimento das receitas e rentabilidades nesta área, que já vem de há algum tempo e que se pode explicar-se da seguinte forma:

O sector da saúde em Portugal é desde há já alguns anos um dos mais desenvolvidos ao nível mundial, onde compete pelos primeiros lugares nos mais importantes índices, ao ponto de a saúde, somando produtos e serviços, ocupar hoje os primeiros lugares no ranking de exportações portuguesas. Por outro lado, durante muitos anos a prestação de cuidados de saúde esteve na sua quase totalidade a cargo do Estado e do setor social. E, pois, da conjugação destas duas realidades que surge a oportunidade de crescimento de um sector privado de saúde, que paulatinamente tem vindo estender-se e a aumentar a sua importância.

O crescente aumento de peso do setor privado de cuidados de saúde vê-se pelo aparecimento e fortalecimento de players privados na saúde, que embora tenham ainda como principal cliente o Estado, já contam com uma parte importante da sua faturação a privados – particulares e empresas:

Seja por força da evolução que também tem acontecido nos setor dos seguros e planos de saúde;

Seja pela crescente importância que a saúde e o bem-estar têm vindo a ganhar nos orçamentos das famílias, com a consequente maior disponibilidade para gastar dinheiro em bens

Eduardo Nogueira Pinto- Coordenador da equipa de Saúde, Ciências da Vida e Farmacêutico do PLMJ

e serviços de saúde, não só em situações criticas, mas também na prevenção, no diagnóstico precoce, na educação;                                                                                                                                                           Seja, finalmente, pela globalização deste mercado, com Portugal a ser um dos destinos que melhores cuidados de saúde oferece em termos de qualidade/preço a cidadãos de outros países. Isto tendo como pano de fundo o progressivo aumento da esperança média de vida e consequente existência de cada vez mais cidadãos seniores com necessidades crónicas de assistência em saúde.

Há portanto uma tendência de expansão de setor privado dos cuidados de saúde em razão de uma maior procura – consistente e com propensão para aumentar nos próximos tempos – e de uma margem de expansão considerável, que resulta do facto de se ter partido de um ponto em que a prestação de cuidados de saúde pelo setor privado era pouco mais que residual, o que gera crescimento e atrai o interesse dos investidores por este sector, incluindo, naturalmente, os investidores de private equity.

Mexico’s revision of maritime regulatory framework brings clarity in wake of energy reform

Posted on
torres-medina

By Benjamin Torres and Hector Medina

Baker & McKenzie México 

Mexico is restructuring its entire regulatory framework governing the energy sector, and hasn’t neglected the need to address ambiguities hindering private sector participation in linked industries governed by maritime law.

The first step in the country’s sweeping energy reform was taken by the Mexican government on 20 December, 2013, with landmark amendments to certain key articles of the Mexican Constitution related to the energy sector, including hydrocarbons and power generation. Those amendments are the legal foundation for broader participation by private entities in several activities that were previously reserved for Mexican nationals or the Mexican state.

Mexico has made several attempts to stimulate the development of its energy sector over the years, including the so-called “Energy Reform” spearheaded by former president Felipe Calderon in 2008. The truth is, none of the previous attempts had the desired effect, since any real change required a revision of the fundamental legal framework governing the energy sector in Mexico: the Constitution.

The recent constitutional reforms have led to the enactment of a new set of energy laws and regulations as well as substantive amendments to other laws and regulations to align them with the new energy reform framework. The intention is clear: to allow greater private participation in the entire Mexican energy sector, downstream, midstream and upstream, whether hydrocarbons or power.

The reform is still in its implementation phase and there are several regulations, administrative guidelines and other regulatory provisions yet to be issued. However, over the last year, the reform has achieved measurable results, particularly in the hydrocarbons sector with the publication of tenders for offshore shallow-water exploration and production and production enhancement under the Round One bidding procedure, which were published by the recently strengthened Mexican National Hydrocarbons Commission (CNH). The call for tenders has been well received by many of the relevant players in the domestic and international energy industry. Several well-known companies in the upstream sector are participating in different stages of the tender process.

There are other sectors of activity that have been realigned with the new energy policies introduced by the Mexican government as a result of the constitutional reforms. The maritime sector, which has a very close connection to the oil and gas industry in offshore exploration and production operations, is governed by the Navigation and Maritime Commerce Law enacted in June 2006 (the NMC law).

The NMC law governs the operation of vessels and other naval artifacts in Mexican waters as well as the most important agreements related to such activities including charter parties and purchase and sale agreements, among others. A naval artifact is defined as any fixed or floating structure not designed or built for navigation but that is capable of being moved on the water by itself or by another vessel, or built on the water.

Regulations for the NMC Law were published in the Federal Official Gazette on 4 March, 2015 and became effective on 4 April, 2015.

Prior to the enactment of the NMC law, two previous versions of navigation laws coexisted and remained in force: a Navigation Law enacted in 1994 as well as another Navigation Law and Maritime Commerce Law enacted in 1963. Both were repealed by the new NMC law except for certain regulations under the Navigation Law of 1994, which remained in effect. Those regulations have now been furnished by the new regulation published on 4 March, 2015, which offer new guidelines for private sector business opportunities.

Prior to the new regulations of the NMC Law, the legal standing of foreign vessels in Mexican waters operated by foreign navigation companies was not entirely clear and according to some interpretations, only Mexican navigation companies could operate foreign-flagged vessels in Mexico by securing a temporary navigation permit limited to a maximum of two years. These permits are granted for a period of three months and can be renewed up to seven times. If the vessel stays more than two years in Mexican waters, it has to be flagged as Mexican, but certain exceptions may apply for highly specialized vessels, including those dedicated to oil and gas activities.

It was, however, possible for foreign navigation companies to operate foreign-flagged naval artifacts, such as drilling rigs and production platforms under temporary authorizations. This confusing legal structure led foreigners to implement complex corporate and tax structures involving incorporation of Mexican navigation companies to hold permits to operate foreign-flagged vessels and still comply with restrictions on foreign investment provided by the law.

The new regulations to the NMC law provide a much clearer process to allow foreign entities to secure permits to operate foreign-flagged vessels and naval artifacts, such as rigs and production platforms. Although foreign navigation companies will continue to face some restrictions, these will not represent a significant obstacle to their business activities. Moreover, the new regulations provide specific treatment for vessels and naval artifacts dedicated to oil and gas activities, including its regulation of navigation and permanency in Mexican waters, safety and inspection, crew training, and prevention of pollution caused by hydrocarbons, among other matters critically important to prepare an efficient business plan.

Article 40 of the NMC law provides that “the operation and exploitation of vessels in interior and coastal navigation is reserved to Mexican navigation companies with Mexican vessels”. However, an exception is provided in case of the lack of existence of available Mexican vessels in equal technical conditions or in case of public interest, where it is possible to grant temporary permits for coastal navigation in favor of Mexican navigation companies with foreign vessels.

Moreover, Article 41 of the NMC law provides that “having conducted the bidding process with the preference provided under items I and II of the above Article, a permit may be granted for a new procedure including foreign navigation companies with foreign vessels.” It is important to mention that prior the enactment of the new regulations to the NMC law, there was no clear procedure provided to include foreign navigation companies with foreign vessels and therefore to issue temporary navigation permits in favor of foreign navigation companies with foreign vessels, as provided under Article 41.

Now, the new regulations to the NMC law, provide under Article 226 that, “the foreign navigation companies, in order to exploit and operate foreign vessels in coastal navigation, will require a temporary navigation permit according to Article 41 of the NMC law…”.

In light of the above, the possibility for a foreign navigation company to apply for a temporary navigation permit to operate foreign vessels in coastal Mexican waters has greater clarity than under the previous regulation. It is provided, however, that the Maritime Transportation Industrial Chamber must be notified as to the application of any permit, such that the chamber may indicate the availability of a Mexican vessel with the same technical capabilities. A general notice must be served to Mexican navigation companies so they can exercise their preferential right granted under Article 40 of the NMC law, as outlined above.

In conclusion, if a foreign navigation company applies for a temporary navigation permit to operate a foreign vessel in Mexican coastal waters, the procedure described above shall be conducted and all the conditions under Article 41 of the NMC law and under Article 226 of its new regulations must be complied with, so the corresponding authority can issue a navigation permit, even if it is a foreign navigation company with a foreign vessel.

OTHER OPPORTUNITIES IN MEXICO’S MARITIME SECTOR

Another important activity that is expected to be further developed in Mexico is ship building. This is also reflected in the new regulations to the NMC law, which added specific provisions and standards for such activities, including the granting of authorizations for shipyards to operate in Mexico.

The Mexican government’s effort to harmonize all sectors involved or related with the new energy industry has been remarkable, and the maritime sector constitutes clear evidence of this.

In addition to the enactment of the regulations to the NMC law, the federal government aims to foster and promote the sector. Last year, it announced a plan to update the applicable regulatory framework to increase the legal certainty in connection with the merchant marine; extend and modernize port infrastructure; and modernize the maritime fleet, focused on highly specialized equipment for the oil and gas sector. The plan also includes substantial investment.

Companies interested in participating in maritime business opportunities in Mexico will need to fully understand and be well advised of the Mexican maritime regulatory framework, including its recent developments, in order to carry out an effective business plan and implement the most efficient corporate and tax structures.

________________________________________________________________________________

About the authors

Benjamin Torres is a partner at Baker & McKenzie and head of the firm’s energy, mining and infrastructure practice in Mexico.

Hector Medina is an associate in the firm’s real estate group, and a member of the mining, energy and infrastructure practice group.