Lead managers Barclays Capital, Crédit Agricole, DZ Bank, Goldman Sachs and JPMorgan snap up a Euromoney Deals of the Year 2011 award, after the Eurozone debt crisis fails to halt the benchmark European Union €4 billion transaction

Weak equities, developments in DCM and intra-regional M&A trends make for an interesting – if eclectic – mix of Latin American deals of the year

If all the emerging regions, Central and Eastern Europe suffered the most for the sins of its allegedly more advanced neighbours last year. As the eurozone’s troubles escalated, fear of contagion sent investors running for cover and all but the strongest names found themselves shut or priced out of the global capital markets.

The need for a change in approach to the new normal pervaded the markets last year from the largest deals to the smallest. BNP Paribas extended its reach in bespoke index products to address the changing priorities among its private banking clients. The Emerging Balanced Note that it developed for a Belgian private client last year was a direct answer to the changing demands of an increasingly sophisticated client base. "The client wanted a product invested in emerging markets so the key was to find the right underlying," says Gilles Staquet, managing director and head of global equities and commodity derivatives sales at BNP Paribas in Brussels. "The easy option would have been to use a few market indices or to create a custom-built basket of stocks. But using funds was the best solution as they are dynamically managed by specialists."

The fate of another benchmark IPO last year could not have been more different: by the end of 2011 Kinder Morgan’s $3.3 billion IPO – which was launched in February – was the only top-10 global IPO that was trading above its issue price. The deal was the largest in the energy sector since 1998 and is one of the top-five private-equity-backed IPOs ever. Its sheer size in one of the most volatile years in the equity markets is impressive – particularly as it was led only by Goldman Sachs as left lead and Barclays Capital. But it is the structure that makes it unique.

If much of the world lacked bright moments in 2011, you could at least find them in Asia – and nowhere more so than in Indonesia.

Away from the sovereign issuers there were many other impressive transactions, such as Petrobras’s $6 billion issue in January. But the outstanding deal was OGX’s debut $2.563 billion transaction. It was the largest high-yield offering by an emerging market issuer and it was the largest high-yield oil and gas offering. But more than this, it was an example of international capital markets delivering debt financing to the region’s vital energy industries and an excellent demonstration of the markets working with the issuer and its investment banks to deliver a mutually beneficial transaction.

AEI was a unique deal: a disposal process that enabled the owner to maximize the value of its Latin American assets. The company is an energy infrastructure business with assets in power distribution, power generation, natural gas transportation and natural gas distribution. The company is majority-owned by private equity company Ashmore Group, which had been looking to sell its Latin American assets in an initial public offering, twice failing to price despite lowering the valuation from its 2009 attempt of $3.9 billion to $3.2 billion in 2010.

Latin American markets promised much but delivered little in terms of equity transactions. Brazil, the traditional engine of ECM activity, flattered to deceive with a successful IPO by Arezzo in January. Then the market fell away as deal after deal has priced at the bottom of or below its pricing range.

It was a year that many in banking would like to forget. But adversity can be the mother of invention and an impressive array of transactions shone through the gloom: evidence of the market’s resilience in the face of everything macroeconomic headwinds can throw at it

As credit tightened around the world, the best deals in the Middle East were those that opened new avenues for finance.

June also witnessed the return to the global capital markets of Russian telecoms company Vimpelcom, which again won plaudits for executing a bumper bond sale against a backdrop of increasing unease over Europe’s debt woes. At $2.2 billion, the multi-tranche deal was the largest ever from a double-B rated CEEMEA credit and the largest from a Russian corporate since 2009 – yet the order book reached $5 billion in barely four hours and the issuer was able to add a $200 million floating-rate piece on the back of reverse enquiry from investors.

However, it was Republic of Chile’s $1 billion bond in September that takes our second award. The $1 billion of 2021s was priced in volatile markets in early September, with the republic taking advantage of an intra-day window to achieve a record low all-in pricing of 3.35%, compared with the 3.89% it achieved the year before. On the same day, the Republic of Chile also re-tapped the Chilean peso-denominated 2020s for another $350 million equivalent. The focus of the re-tap was to minimize yield rather than achieve size and Chile priced the new notes at a yield of 4.4%. Both issues were managed by Deutsche Bank and HSBC.

Other notable CEE bond deals were few and far between last year, even before global conditions and an ill-timed $1 billion international debut from Serbia slammed markets shut in mid-September. Russian iron-ore producer Metalloinvest deserves a mention for a solid inaugural $750 million five-year transaction that attracted four times oversubscription against a difficult market backdrop in July, but the final place in the 2011 winners list goes to Russian Railways for reopening the sterling market to CEE investors with an unprecedented 20-year deal.

Finally, to M&A, where the outstanding transaction was the $9 billion strategic partnership between BP and Reliance. This wasn’t a landmark takeover, since there was no overall change of control – instead, Reliance Industries sold a 30% stake in its southern and eastern Indian oil and gas fields to BP for $7.2 billion plus up to $1.8 billion in performance payments. However, it warrants recognition partly through scale – one of the biggest foreign direct investment deals into India – and partly through the sheer effort of getting any inbound deal over the line in India.

Indonesia wasn’t the only sovereign to impress in 2011. Euromoney has long argued the importance of deep, liquid, sophisticated local-currency bond markets in Asia, and the transaction that most clearly spelled out how much improvement has taken place came from Thailand, with a Bt40 billion ($1.26 billion) inflation-linked bond that priced in July.

Corporates from sub-Saharan Africa will find it easier to access the bond market now that sovereign benchmarks are in place that give an alternative to the equity markets. Indeed, this year saw perhaps the first non-South African sub-Saharan African corporate to borrow in the international capital markets.

Despite challenges in credit markets, there was still room for innovation and scale in Asian high yield, with the standout deal coming from India. This came as part of Vedanta Resources’ takeover of a stake in Cairn India, a process that began in 2010 and required a swift raising of $6 billion of capital. This started out as a $3.5 billion term loan, a $1.5 billion bridge-to-bond deal and $1 billion bridge-to-equity. By the time it became clear that the deal was going to go through, Vedanta sought to take out the bridge-to-bond bit, and did so with a $1.65 billion bond that became India’s biggest corporate bond to date, and the largest true corporate – that is, not a government body – from anywhere in south or southeast Asia.

New parameters were not the preserve of the SSA market: European FIG was battered not only by sovereign distress but also by grinding regulatory uncertainty throughout the year. Rabobank’s $2 billion 8.4% perpetual non-call tier 1 issue in early November was an answer to both. It achieved the impressive feat of selling the most CRD4 compliant trade to date into one of the weakest market backdrops of the year. Rabobank’s desire to lead from the front on new hybrid instruments prompted the bank to issue an innovative hybrid tier 1 deal in January last year but the November deal was not only the most CRD4-compliant trade to date but was also successfully closed as other issuers – most notably the EFSF – were forced to pull deals from the market because of relentless sovereign-induced volatility. "We were mandated during a period of intense volatility, with an event and headline driven market, multiple EU meetings and announcements, all leading into the G20 summit on November 4," explains Sid Prasad, head of EMEA FIG global finance at Nomura in London. "It was important to find the right issuance window, given the overall nervousness in the market." The deal was launched on Monday October 31 following a strong rally post the EU Summit the previous week. However, that was the Monday that MF Global filed for bankruptcy. The result – exacerbated by uncertainties around the Greek referendum on the Tuesday – was that the EuroStoxx 50 fell by 2.8% on Monday and 5.7% on Tuesday. And the iTraxx financials sub-index widened by 30 basis points on Monday and 62bp on Tuesday.

These commodity- and energy-sector transactions exude a confidence that could not be further removed from the relentless pessimism of the European debt markets – last year’s reluctant lead story in the capital markets. The eurozone debt crisis dominated everything in the second half of the year and when the European Union decided to tap the market for €4 billion in September some in the market doubted that a 15-year deal could get done. "We had not seen a long-end syndicated euro deal in the sector since June 2010 and there was uncertainty about volume of appetite at the long end given the surrounding volatility," says Lee Cumbes, managing director at Barclays Capital in London. "This was not the sort of deal that you could just put a price out and go." The reaction could hardly have been more positive. Books opened on September 21 at 8.30am and after raising €5 billion in 50 minutes they were closed at 9.45am, a testament to the solid preparation that was put into the trade. "We knew that there was a degree of underlying structural demand from insurance companies and pension funds that had not been serviced due to a lack of supply and changing credit preferences," says Cumbes. "The number of active issuers at the long end had fallen, increasing the need for diversification. So, we had the confidence to pitch that there was firm demand for a new deal."

One of the most interesting transactions in the market last year was set in motion a full four-and-a-half years ago. The death on August 1 2006 of Margaret Cargill, the granddaughter of Cargill founder WW Cargill, set in motion a chain of events that would result, in 2011, in one of the more remarkable transactions in recent capital markets history.

In the Middle East last year, borrowers sought to diversify sources of financing, while in Africa new issuers added to the continent’s growing recognition on global markets

With eurozone turmoil spilling over into emerging Europe it took special skills, tenacity and organization to get deals away

Amidst the financial gloom of 2011, Asia was a beacon of hope: Thailand’s markets remained remarkably resilient, the dim sum market approached maturity and depth, and there were standout deals from India and China – but Indonesia dazzled the most

If leveraged loan transactions were falling by the wayside, however, it was nothing compared with the carnage in equity markets. Even the Polish government, renowned for two years of wildly successful privatizations, was forced to cancel a planned Z7 billion secondary offering of leading bank PKO BP, while the tally of pulled Russian deals quickly ran into double figures.

For many in the capital markets, 2011 was a year to forget. But it’s in times of crisis that the best advisers come to the fore. Which deals hit the sweet spots over the past 12 months, when markets were like a box of chocolates – you never knew what you were going to get?

Another example of Gulf firms tapping alternative financing at a time of tighter global liquidity can be seen in the €1.25 billion exchangeable bond from Aabar Investments PJS in May.

Good deals were harder to find in the equity world, but they were out there, and a natural standout was Sun Art Retail Group, whose $1.2 billion IPO achieved the rare double act of being good for both issuer and investors. Most deals declined, even tanked; Sun Art priced at HK$7.20 in July and at the time of writing was trading at just under HK$10.

Meanwhile, in Africa, the main story was not just about new funding sources, but also the arrival of new issuers, as investors turned optimistic about the continent’s success. First-time benchmark-sized Eurobonds by African sovereigns became a stamp of approval for these countries’ economic prospects, and will encourage further capital flows.

In 2011, the CNH market achieved a hectic graduation from nascent wild-west-style market to something approaching maturity and depth. The clearest illustration of this came with a Rmb1.5 billion [$240 million] subordinated bond from ICBC (Asia), owned by mainland banking heavyweight ICBC.