What are the key changes taking place in U.S. capital markets? How is Paul Hastings helping clients respond?
The JOBS Act implementation continues apace as the SEC voted earlier this month to lift the ban on general solicitation and advertising in connection with Regulation D and Rule 144A offerings effective September 23, 2013. We are advising a startup investment bank in developing innovative methods utilizing social media and crowdsourcing technologies to conduct online private offerings for early stage biotech and healthcare focused companies. We are also working with private fund sponsors to develop strategies for accessing the expanded pool of accredited investors that now can be reached through general solicitation and advertising. Outside of changes caused by regulatory developments, capital markets continually evolve and innovate by responding to shifts in market demand (as with MLPs). MLPs have become the dominant capital markets vehicle in the energy industry and we see a great opportunity in that sector. We have added MLP capital markets partner Gislar Donnenberg and additional energy lawyers to expand our Energy and Oil and Gas practice centered in Houston.
—Michael Zuppone, Chair of the Global Capital Markets Practice, New York
Which recent developments do you think will have the largest impact on Latin American markets?
Despite some uncertainty in the interest rate environment and developments in Brazil, the region remains on a clear upward trajectory due to favorable economic trends, higher levels of political stability, a growing middle class, and increased openness and transparency in the society. The expectation is that there will be continued high levels of finance activity in 2013 driven in part by infrastructure financings for events like the World Cup and Olympics. Another trend we continue to see is a greater variety in the types of inbound, outbound and intra-regional M&A. There is a new wave of investors who have not historically invested in Latin America – e.g. non-New York based U.S. PE funds and Asian companies and a range of new industries that interest investors, including technology. Investors are interested in commodities, agribusiness, fisheries, infrastructure and energy. For lawyers who have cross-cultural fluency and a keen understanding of local culture and business, there are tremendous opportunities in this market. Paul Hastings’ Latin America practice continues to participate in cutting-edge transactions in the region and is likely the most active US firm in Mexico, one of the strongest performing economies in the region.
What trends are you seeing in the Asian capital markets and are any particular markets gaining investor attention?
Although capital markets have been volatile, we have closed a number of Hong Kong IPOs, convertible bond and high yield bond issuances during the first half of the year and there are quite a few others in the pipeline hoping to launch in the second half of the year if conditions are right. We’ve also seen a pick-up in the ASEAN markets, which are increasingly providing a counterweight to the Hong Kong market. Malaysia and the Philippines in particular appear to be increasing their influence and gaining more attention from investors, as is ASEAN as a whole.
—David Grimm, Hong Kong
What are some alternative means for companies to raise capital in Asia?
As investors pull their funds out of the high yield and dim sum markets, and the equity capital market continues to languish, companies are seeking more innovative ways to raise funds. Issuers with debt or convertible bonds due for redemption or refinancing are preparing to use onshore assets and funds to secure offshore credit, or to use trust structures to tap alternative funding. We are focused on helping our clients develop the right structures to access the growing Asian investor base, as well as to navigate changes we expect will occur as China accelerates its economic and financial reforms.
—Vivian Lam, Hong Kong
What do you see happening in Southeast Asia?
As capital markets across Asia continue to fluctuate we are seeing more activity in the ASEAN markets such as the Philippines. This past 18 months we have seen a rising number of equity and debt offerings in the Philippines, where the economy is generally strong and there is plenty of liquidity in the market, particularly among domestic investors. We believe raising growth capital in the ASEAN markets is a trend that will continue for the next year. While a significant drop in the markets followed the initial announcements of an expected reduction in quantitative easing by the U.S. Federal Reserve, some of the regional stock markets have partially rebounded. Nonetheless we see several debt and equity issuances affected by the recent market slowdown waiting in the wings expecting the markets to reactivate in the third quarter.
What is the outlook for Korean IPOs?
The outlook for the Korean IPO market in the second half of 2013 remains unclear due to market uncertainty. An interesting development to watch, though, is secondary listings of global depositary receipts on foreign exchanges by companies already listed on the Korea Exchange. In addition, we may see new attempts to list Chinese subsidiaries of Korean companies in Hong Kong despite several setbacks in the past.
—Dong Chul Kim, Seoul
What is your view of the European high yield market?
The European high yield market had a very strong first six months with yet another record in issuance volumes. Following Bernanke’s speech in June, the markets dipped. However, we expect markets to pick up again in the fall as the trend from bank to capital markets financing remains intact.