Emerging market firms innovate to raise funds
Raising capital used to be a cinch for emerging-market companies, as foreign investors couldn't seem to buy enough of their stocks and bonds. Then U.S. rates skyrocketed in the last year and the Mexican peso fell, and suddenly the flush days were gone.</br></br>Now, companies from Peru to Slovenia are forced to find new, more enticing ways to lure foreign money. The trend is opening some mouth-watering opportunities for investors willing to brave the risks.</br></br>With public markets practically closed to emerging-markets issuers, "their cost of capital has gone up tremendously," says Peter Marber, president of Wasserstein Perella Emerging Markets, a unit of the New York investment banking firm Wasserstein Perella. As a result, investors who are willing to provide that capital get a much bigger bang for their money.</br></br>What's more, the fact that emerging-markets companies are obliged to seek money in private transactions, rather than on public markets, gives investors more control over risks. While the companies pay lower financing costs than they might have with bank loans or bond issues, they typically must give investors more say.</br></br>Today's hard times mean "portfolio investment is out and direct investment is in," says Roberto Danino, chairman of the Latin American practice group at the law firm Rogers & Wells in Washington.