Despite recent successful deals in the region, challenges remain for LatAm issuers to fully exploit the potential for securitization transactions. Growing markets in Brazil and cross-border deals such as the recent $229m transaction from Peru’s EsSalud have boosted hopes, though caution from the buyside remains an obstacle. “Latin America is beginning in the securitization market. Everything is brand new and we need time to see what happens and how things develop. Complexity makes it hard to value spreads. Why should we buy a securitization with the same spread as a corporate bond and more complicated with embedded options that is not fairly valued?” says Jorge Unda, CIO at BBVA Asset Management. Issuers agree that for the moment, simplicity is the key. “We have to be clear about objectives. One has to be very neat, simple and sound. It is not easy, and sometimes it is hard to know if things were priced properly,” says Jerzy Skornya, senior finance manager at Mexico’s Infonavit. Covered bonds are one class generating optimism, despite Global Bank pulling what would have been the region’s first such deal earlier this month. “Covered bonds are coming when the time is right. In countries like Mexico there is need to expand the investor base to international markets and covered bonds is an instrument that would make it a little easier,” says Michael Morcom, head of LatAm agency and trust sales at Citi. “With growing interest from US international investors in local currency-denominated instruments, a covered bond with a payment profile that looks like a corporate bond makes it easy to hedge, and I do think the time is right for that,” he adds. With Latin America’s growing middle class and a need to provide to provide liquidity to the growing mortgage origination business and assure growth at an appropriate rate, covered bonds provide an attractive alternative to MBS given their outperformance during crisis periods. “Can we convince investors that this is a product that
Category: Structured Finance
Banorte Preps MXP Issue
Mexican lender Banorte is looking to sell MXP3.2bn ($232m) in 10-year NC5 Tier 2 subordinated bonds in the local market, according to a person familiar with the deal. The issuance is expected to take place in June, with proceeds to be used to fund working capital. The bonds would be the fifth issuance under a MXP15bn program, and will pay a spread to the TIIE benchmark. Ixe is leading the deal, rated AAA on a national scale.
Nissan Dealers Near Mexican ABS
Sistema de Credito Automotriz (Sicrea) is preparing to issue up to MXP1.25bn ($92m) through a domestic securitization, scheduled for May 23. The 2017 bond is backed by credit receivables and pays a spread to the TIIE benchmark. Sicrea is an association of Nissan dealers which provides credit for auto loans. ING is managing the transaction, rated AAA on a domestic scale. Sicrea last issued in 2007, when it priced MXP800m in 4-year bonds at TIIE+54bp.
Banca Mifel Gets Tier 2
Banca Mifel emerged Thursday to price a $150m Tier-2 subordinated 10-year bond, after seeing $215m in demand. The Mexican commercial bank priced at 98.442, with a 9.75% coupon, to yield 10%, pricing in line with 10%-area guidance. With the funds, Mifel plans to repurchase its outstanding $100m 11% perpetual bonds, callable in July. Demand was heard coming from existing perpetual bond holders, along with a mix of private banking and institutional accounts. Though difficult to comp, investors were heard getting a 300bp pickup to A2/BBB+ BBVA Bancomer’s Tier-2 subordinated 6.5% 2021 bonds, according to investors and bankers following the deal. Some investors opted out of participation due to Mifel’s small size. A West Coast-based participating EM investor and existing bond holder, says the price represents fair value. “Double digits are tempting, but the deal was small, illiquid and subordinated,” says a European-based EM debt investor. “Many investors don’t play in bank deals, and most of those who do focus on the larger borrowers and more liquid deals,” adds another EM investor. The proposed notes will likely receive a 50% equity credit during the first 5 years outstanding, says Fitch, which assigns a B rating to the new bonds, below the default BB minus mark. Credit Suisse managed. The perpetual bonds were originally sold, raising $150m, in 2007, via Deutsche Bank with Credit Suisse as co-manager.
Brazilian Sugar Cane Gets Development Funds
BNDES has agreed to provide BRL226.2m ($116m) to finance Usina de Acucar Santa Terezinha’s sugar cane planting in the Brazilian state of Parana. The loan comes as part of a BNDES program that aims to generate productivity at aging sugar plantations, BNDES says. The program, which has a budget of BRL4bn available until the end of this year, will provide money for companies that want to renovate or plant new sugar cane fields, says a person familiar with the program, which can finance up to 80% of the investment. The maximum tenor of a loan is 6 years, with a maximum grace period of 18 months. No interest rate was available. BNDES will look to approve several projects in the coming months, the person familiar with the program adds.
Elektra Unit Prices Securitization
Intra Mexicana has raised MXP2.7bn ($199m) through a domestic market securitization. The 2019 floating-rate bonds, backed by receivables of money transfer fees, priced at TIIE+270bp. Proceeds will be used to fund Grupo Elektra’s acquisition of payday lender Advance America and for general corporate purposes. Actinver, Ixe and Value managed the transaction, rated AA minus on a national scale. Intra Mexicana, an electronic money transfer company operating under the brand name Dinero Express, started operations in 1996 and began to expand in Latin America in 2003.
IDB Guarantee Aims to Boost Mexico DCM
The Interamerican Development Bank (IDB) has agreed provide a $150m partial credit guarantee facility, to boost support and development of Mexico’s capital markets and improve access to finance for Mexican companies, it says. The multilateral will provide a guarantee for local and international debt issuances of Mexican entities arranged by Banamex. The facility will be available for 3 years, with an option to be extended for another 3 years. It is expected to provide partial credit guarantees for as many as 9 issuers.
Titularizadora Places RMBS
Securitization specialist Titularizadora Colombiana has sold COP339bn ($192m) in 10-year RMBS in the domestic market, it says. The 2022 bonds pay 6.91%. The issue was rated AAA on a national scale, and saw demand above COP636bn. Scheduled for Wednesday in Colombia’s local market is Cementos Argos, which is expected to issue up to COP500bn.
Elektra Unit Nears Money Transfer Securitization
Intra Mexicana plans to raise up to MXP3bn ($224m) though a domestic securitization, scheduled for May 10. The 2019 floating-rate bonds are backed by receivables of money transfer fees done under the Dinero Express brand. The proceeds will be used to fund the acquisition of payday lender Advance America by Grupo Elektra and for general corporate purposes. Actinver, Ixe and Value are managing the transaction, rated AA minus on a national scale. Intra Mexicana, an electronic money transfer company operating under the brand name Dinero Express, started operations in 1996 and began to expand in Latin America in 2003.
Global Bank Postpones Covered Bond Plans
Global Bank has cancelled plans to raise funds in the international bond market, according to investors following the sale. The Panamanian lender had emerged with 5.00%-5.25% guidance for a $200m 5-year covered bond, which would have represented the debut for the asset class in Latin America. Deutsche Bank was managing, with HSBC as co-manager.