DealZone

Keeping score: Rio, real estate, rising rates

June 12, 2009

This week’s Thomson Reuters “Investment Banking Scorecard” is out. Here are the highlights:

“BHP/Rio Tinto Deal Changes Global M&A Landscape

“The announcement of a joint venture between Australia’s BHP Billiton and domestic rival Rio Tinto last Friday ranks as the second largest worldwide deal this year and may prove fruitful for some investment banks.  Advisors Gresham Partners, Lazard, Morgan Stanley, and Goldman Sachs will advise on the deal, translating to valuable deal activity in a year where M&A volume is down 43%.  Earlier this year, Chinalco announced a multi-continent $19 billion investment in Rio Tinto, which was withdrawn as a result of the new mega-deal.  Of the seven banks on the initial Chinalco deal, only Morgan Stanley, ranked first for worldwide M&A year-to-date, secured a role on the BHP deal.

“Real Estate Equity Capital Markets Activity up 85%

“Equity capital markets offerings from real estate issuers have soared so far in 2009, while activity in the M&A, DCM, and loans segments remains down from 2008.  Real estate ECM volume is up 85% over last year at $36.5 billion.  Activity in the Americas accounts for 44.7% of the total volume across the sector, followed by Asia (including Japan) with 36.6% and Europe with 18.4% share of the market.

“The recent follow-on offering from real estate investment trust Boston Properties for $862.5 million contributed to this total.

“Rising Interest Rates Slow Investment Grade Debt

“With rising US interest rates concerning investors, investment grade debt volume so far this week totals just $31.4 billion, the slowest weekly volume in nearly two months.  For the week, European activity accounted for 53% of volume, 19% from issuers in the Americas, 16% from Asia, and 12% from Japan.

Several large Asian and Japanese corporate deals this week contributed to a booming year for debt capital markets in Asia, where volume totals $172.5 billion year-to-date 2009, a 45% increase in over 2008.”

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