Chile adding value
Tortilla tip-off
1 Chile
WHAT'S NkwS Issue 4. April 1998
latin american update
15
You don't necessarily have to be a branch
office in order to add value tor your
customers, as Ronald blok of our Santiago
rep office makes clear. The Santiago team
initially helped our clients meet their
offshore financial needs by directing
business to other areas within our
network, ineluding Curai^ao and New
York. Tben, in April of last year, a Chilean
offshoot of Rabo Curagao, Rabotrading
Chile, opened its doors in Santiago to help
our South American clients manage their
agribusiness inventories. Now, the Chile
operation has added yet another arrow to
its quiver - a new subsidiary that goes
under the name of Raboinvestments Chile
l.tda. Raboinvestments further widens the
scope of our possible activity on a strong
i Ronald
1 Blok wheel-
ing and
0 dealing in
deal
Gruma Corporation, a subsidiary of our
Mexican cliënt Gruma SA, is a pre-
eminent producer and marketer of corn
flours and tortiilas in an otherwise highly
fragmented US market that is crowded
with as many as 600 small players.
Starting from niche geographic markets in
the American Southwest, Arizona and
southern California, the company has
spread nation-wide in its pursuit of rapid
growth. It now controls roughly a quarter
of the estimated USD 1.8 billion tortilla
industry, and an 85 percent market share
in corn flour.
CUTTING EDGE
Our San Francisco office has lead-
managed and underwritten a USD 70
million unsecured five-year syndicated
loan, as well as a separate USD 5 million
unsecured 364 day swing line of credit
designed to handle Gruma's smaller short
term requirements. Competition for these
deals was keen. To replace its current
revolving credit line agented by Chase,
Gruma solicited bids from a number of
players. These included also Bank of
America, Union Bank of California, and
Rabobank International. The aim was to
and vital market that is increasingly
looking for international growth.
MEETING NEEDS
Formerly owned by the National Bank of
Canada, our new investment company is
able to offer Chilean peso denominated
loans. This is crucial because of Chilean
Central Bank reserve measures, which
require that 30 percent of all imported
currency be set aside with the Central
Bank, for a period of time, in non interest
bearing accounts: a move aimed at
preventing a repeat of the speculative
bubbles that have hit Mexico and
Indonesia. These regulations effectively
drove up local interest rates. However,
when our Chilean offshoot was confined
to offshore business, we were cut out of
those attractive local markets. Now,
having bought liquidity on which the
reserve measure costs are already paid, we
can tap this higher yielding market with
an unchanged level of risk. We can more
creatively arbitrage our offshore and
onshore capabilities to best meet cliënt
needs.
SPECIFIC DEAL
A recent deal with Banco Santander of
Spain provides a specific illustration: we
were able to extend a 90-day peso loan at
obtain an unsecured credit structure and a
lower price overall. San Francisco quickly
swung into action. In conjunction with the
syndications group, it responded with an
aggressive and well-structured proposal
that bagged the deal, pre-empted a
planned second round of bidding, and set
the stage for a further ripening in our
long-term relationship with the Gruma
group.
WINNING TEAM
Members of our team included Bradford
Scott, the relationship manager, Suzanne
Baird, senior credit analyst, San Francisco
LPO manager Lizz Hund, Ron Klein of
the syndications department, with both
From left to right: Suzanne Baird, Elizabeth
Hund and Brad Scott (San Francisco)
a very attractive margin, indeed at three-
fold the usual rates, unfettered by local
lending limits. 'We secured that deal by
making a rapid decision - approval came
from our investment banking arm in
London within two hours. This kind of
flexibility is a real plus.' In essence, says
Blok, we have assembled nearly all of the
capabilities of a full branch office, without
facing many of the regulatory
disadvantages. Untroubled by low local
lending limits, which would otherwise
require us to tie up substantial equity in
the firm, we can focus on delivering the
right mix of products and services that
add cliënt value and deliver a high return
on solvency at the end of the day.
ARGENTINA TRANSFORMS
As a response to the changing regulatory
and fiscal climate in Argentina, and to
recognize and secure our heightened
profile on that market, the Buenos Aires
representative office has now been legally
transformed into a newly-founded
subsidiary of Rabobank International
Holding BV.The subsidiary will take over all
staff and activities presently conducted
under the auspices of the existing rep
office.
From left to
right: Ron
Klein, Boh
Bucklin and
Ton Garde
niers (New
York)
Bob Bucklin and Ton Gardeniers
providing senior management support.
'Gruma's decision to select our bank was
prompted by a number of considerations,'
Scott explains. First and foremost was
Gruma's comfort with our long-term
relationship, with our strategie food and
agribusiness focus, and with our
understanding of the specifics of its
business. Next, the structure and pricing
of the deal was very competitive and
flexible, as was made clear by the
company's decision to go with Rabobank
without pursuing a second round of
bidding. Finally, Gruma executives have
met our own senior management on a
number of occasions, and have thus
developed solid personal ties. They have
expressed their confidence not only in our
ability to deliver on this deal but also in
our fundamental and long-term
commitment to its prosperity.
