Corporate Finance : Global Equity/drs

Global Equity Issues Setting Record Pace

Global equity capital market volume surpassed the $400 billion level in mid-July, marking an increase of 46% from the same period a year earlier, and was the highest year-to-date volume on record, according to Dealogic. It took only 188 days to reach the $400 billion level this year, the shortest time on record to pass that milestone. The previous record of 199 days was set in 2000.

The volume of initial public offerings this year rose 55% from a year ago, as of July 19, while follow-on equity issuance rose 32% from the same period of 2005, according to Dealogic.

Bank of Chinas $11.2 billion offering in May was the largest IPO of 2006 so far. Bank of China International, Goldman Sachs and UBS Investment Bank led the sale. Bank of China raised an additional $2.5 billion in Shanghai in July in Chinas biggest-ever domestic IPO. China CMAC Engineering in June became the first company to list domestically since Beijing lifted a one-year ban on stock issues.

The largest follow-on equity issue by a Chinese company in the first six months of 2006 was CNOOCs $2 billion offering via Credit Suisse, Goldman Sachs and JPMorgan. Goldman Sachs led the Chinese follow-on volume rankings in the first half, with an 18.9% market share.

Rosneft, one of Russias largest oil and gas companies, raised $10.4 billion in July in the countrys biggest IPO ever and the fifth-largest worldwide. The company said the offering gave it a total value of almost $80 billion, which is a higher market capitalization than Lukoil, the countrys biggest oil producer.

Morgan Stanley, ABN AMRO Rothschild, Dresdner Bank and JPMorgan International (Moscow) led the Rosneft sale. The shares were listed in Moscow and London. JPMorgan announced the establishment of the Rosneft sponsored Regulation S and Rule 144A global depositary receipt programs. The programs were opened in conjunction with Rosnefts GDR offerings, which raised $6.1 billion. Rosneft selected JPMorgan Europe as the depositary.

Polyus Gold in July became the first Russian gold producer to list its shares in the United States when it launched an American depositary receipt program in the over-the-counter market. Polyus, which holds about 20% of Russias gold reserves, was spun out of Norilsk a year ago. Norilsk is the worlds largest nickel and palladium producer.

Polyus is listed on the Russian Trading System and the Moscow Interbank Currency Exchange, or Micex. It raised no money with its ADR program. The Bank of New York is the depositary.

Transelectrica, based in Bucharest, in July became the first utility to be floated in Romania. The IPO, a partial privatization, was conducted through a capital increase. The fact that the offering was heavily oversubscribed, despite the difficult period on the stock markets, demonstrates investors increasing confidence in the Romanian business environment as the country is preparing to join the European Union, says Laurentiu Ciocirlan, director of debt and equity origination at Raiffeisen Capital and Investment in Romania, a member of the consortium that prepared the IPO. The other members of the consortium were Alpha Finance Romania and BRD Securities. The Romanian government aims to create a strong capital market through further IPOs of Romanian utilities.

JPMorgan announced sponsored ADR programs in the over-the-counter market for Japan-based Allied Telesis Holdings, which makes products that support the broadband industry, and Air China, a major Chinese airline. JPMorgan also announced unsponsored ADR programs for Jardine Strategic Holdings, whose stock trades in Singapore, and Japan-based Funai Electric, which makes consumer electronics and computer peripherals.

Meanwhile, Japans Kirin Breweries has completed the voluntary move of its ADR program from Nasdaq to the over-the-counter market.


Gordon Platt