Microfinance is a stable, low risk business that offers a haven in volatile times, according to Helen Alexander, manager at ProCredit Holdings, a German company that controls several microfinance institutions in LatAm. “Microfinance has very low risk; very low default rates,” says Alexander. Stability in the sector will continue, Alexander says, even through the current markets crisis. Local and foreign capital markets for debt could find opportunities for participating in refinancing of microfinance, Alexander says, adding that transactions bring good returns with the added value of a social benefit. Alexander was a panelist in a seminar at IDB meetings in Miami that reviewed techniques, methodologies and technologies for the microfinance sector in LatAm.
Category: Loans
Moody Rates Mexico Auto Loan Trust Debt
Moody’s has assigned a global scale, local currency rating of Baa1 and a rating of Aaa on its local scale to the class A-1 and class A-2 certificates of the Mexico Auto Loan Trust, Deutsche Bank Irrevocable Trust F/781 that were issued by Deutsche Mexico acting solely in its capacity as trustee. The agency also rates the Class B certificates of the same offering as Ba2 and A2 locally. “Interest and principal to certificate holders will be primarily payable with cash flow from vehicle loan contracts originated by the Mexican financial arm of a car manufacturer and assigned to the trust, which was established under the laws of Mexico,” the agency says. “The ratings are based upon the credit quality of the pool, and credit enhancement in the form of subordination, overcollateralization, a reserve fund, and a yield supplement account.”
IIC Raises $50m in Japanese Syndication
The Inter-American Corporation (IIC), a member of the IDB, has raised $50m via a 3-year syndication via Mizuho. The lender claims the so-called “Ninja Loan” marks the first time a LatAm-based issuer has raised funds among a small group of Japanese banks, including the Tokyo branch of BBVA. Pricing on the deal was not disclosed, but a person close to the process said the margin is comparable to what a AA rated US corporate would raise in today’s market. Mizuho has done Japanese syndications for US clients in the past and aims to increase its pipeline of LatAm deals, a director at the bank told LatinFinance earlier this year.
Bradesco Sells $500m Securitization
Brazil’s Banco Bradesco priced quietly last week $500m in 2014 bonds backed by future foreign payment receivables, at Libor plus 60bp, it has emerged. The private placement follows a similar $250m transaction by Banco do Brasil done last week. Bank of Tokyo Mitsubishi managed the sale. Other Brazilian banks are heard considering following suit, given the difficulties of accessing the international secured bond market. Bradesco placed similar $400m and $500m transactions in August and November, respectively. Banco do Brasil also last week privately placed $250m in 2014 bonds backed by future dollar cash flows generated by the bank’s electronic remittance business. The bonds issued under a $350m MT-103 program paid 55bp over Libor and are backed by Assured Guaranty.
Microfinance Seen Expanding
Microfinance sector continues to grow in LatAm, according to Fernando Lucano, fund manager at Peru’s Cyrano Management, manager of the $265m Global Microfinance Facility fund. “In Peru there is more or less $2.5bn of financial market assets invested in microfinance,” says Lucano. “The size of the Peruvian financial system is between $18bn and $25bn, so there is 10% of assets in microfinance, and that will continue to grow,” he adds. The microfinance sector is growing by 30%-40% a year in Peru, Lucano states. “There is business for everybody: Investment banking, rating agencies, sophisticated investors,” he adds. But the growth and increasing of microfinance calls for a more sophisticated look at the sector, says Lucano, a panelist at a microfinance forum organized by Credit Suisse in New York.
CFE Sets New Mexico Loan Benchmark
Mexico’s Comision Federal de Electricidad (CFE) is paying 40bp over Libor on a $2bn 3-year senior revolving facility, well wide to the 25bp the borrower is heard to have sought last year. Fees of 30bp on $100m MLA tickets and 35bp on $150m senior MLA tickets are also heard from people familiar with the terms. The pricing is a new Mexico high grade benchmark and looks more in line with the market reality – cost of funds have gone up – and on an all-in basis, the issuer will secure a decent deal, given the movement in Libor. However, some still see it on a pure margin basis. “They are definitely paying a premium,” says one banker away from the deal. The BBB+ state-owned utility secured BBVA, RBS, BNP and Santander as bookrunners, and Citi is heard participating in a senior role. Most of the proceeds are being used to refinance bank debt, some of which matures at the end of the year. In November, CFE priced MXP1.2bn in local 2017 bonds at 30bp over Cetes. Other Mexican syndications are waiting in the pipeline to follow this one, now that the price target has been set.
Peru’s Interbank Launches $200m Loan
Interbank, the Peruvian retail bank, is out with a $200m 3-year amortizing loan via Standard Chartered. The deal, now being shopped to MLAs, offers Libor plus 80bp in year one, 85bp in year two and 95bp in year three. Interbank is rated BB, and follows Banco de Credito del Peru, which recently raised $410m, upsized from $300m, at 70bp, 75bp and 85bp over Libor with the same structure. BCP was flexed up by 20bp from levels established last year prior to launch in early January.
DuPont, Bunge JV Gets $200m 2-Year
Greenfield Holdings, a finance company set up by DuPont and Bunge in Brazil, has raised a $200m 2-year loan at Libor plus 100bp. The deal was led by Citi and Societe Generale. Greenfield provides agricultural businesses with financing. Proceeds will help build up the loan book for soybean farmers in Brazil, says a banker close to the deal.
Moody’s Sees Andean Retail Loan Growth
Loan growth at Andean banks was strong across sectors in 2007 and should continue resilient in 2008, according to Moody’s. “Of some concern, however, is the high growth in riskier lending segments such as the consumer and middle market that may eventually lead to asset quality deterioration if not managed prudently,” says the agency. For highly dollarized countries such as Peru and Bolivia, credit risk for banks is heightened because of a natural mismatch of dollar loans to non-dollar earners. Colombian and Peruvian banks get an average rating of D+, while a D minus average rating was issued to Venezuelan and Bolivian institutions. Overall, Moody’s notes that a stable outlook for bank financial strength and deposit ratings is underpinned by improving macroeconomic conditions. “Banks that have relied on earnings from investment securities are shifting their emphasis towards more stable earnings sources such as lending and cash management,” says Moody’s.
Trend Setting Usiminas Loan Gains Momentum
Ten banks have signed MLA tickets on a $1.2bn 3-part loan that Usiminas is syndicating. The deal was launched to general syndication last week, and a meeting will be held Tuesday in Sao Paulo to extend invitations to Brazilian lenders. A 5-year trade piece pays 110bp over Libor and a 7-year offers 135bp over Libor. A $700m 2-year liquidity backup revolver pays Libor plus 75bp on any drawn portion, and 45% of that spread if undrawn. Pricing on the deal is widely seen as reflecting new market conditions and was apparently launched to leave no question in the minds of prospective lenders. Usiminas forced other deals in the market to flex up to comparable levels so they could remain competitive. Retail can choose between tickets of $75m, $50m and $25m. Half must be dedicated to the 2-year revolver while the rest can be split evenly between, or put entirely into, either the 5-year or the 7-year trades. Up front fees for the $75m tickets are 45bp for the 2-year, 50bp for the 5-year and 60bp for the 7-year. The $50m tickets offer 42.5bp, 45.0bp and 55.0bp, while the $25m tickets pay 40bp, 40bp and 50bp. HSBC is leading. MLAs include ABN AMRO, Tokyo Mitsubishi, BBVA, BNP, ING, JPMorgan, Mizuho, Santander, Sumitomo and SocGen.