Once shunned as the scourge of global financial markets, structured finance continues its comeback in Latin America – so long as the external environment permits
Category: Structured Finance
Posted inDaily Brief
Bolivia Banks Stable: Moody’s
The outlook on Bolivia’s banking system remains stable, Moody’s says, as sustainable economic growth, decreasing unemployment, and moderate inflation continue to support the banks’ expansion. “Economic stability has improved credit conditions in Bolivia and contributed to record low non-performing loans at the banks in 2011. Banks have also cleaned up their balance sheets of legacy loans from Bolivia’s last financial crisis,” the agency adds. Declining financial dollarization in Bolivia is also helping profitability, liquidity and asset quality at the banks. The favorable conditions are partly offset by the effects of Bolivia’s still sizeable informal economy, and by low investor confidence in the banking system, along with a potentially adverse political environment, all of which may hinder the demand for credit. Moody’s expects Bolivian banks’ asset quality to remain stable.
Posted inDaily Brief
Fovissste Prices RMBS
Mexico’s government housing agency Fovissste has raised MXP5.20bn ($374m) through a domestic RMBS sale. The 2042 bond is denominated in UDIs and pays a fixed rate of 4.30%. BBVA Bancomer and Banorte-IXE managed the sale, rated AAA on a national scale. The lender previously visited the market in March, raising MXP4.06bn in 2041 notes paying 4.65%.
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BCP Preps DPR Sale
Banco de Credito del Peru is preparing to sell bonds backed by diversified payment rights (DPR), according to a person familiar with the transaction. The exact size has not been determined, but DPR deals in LatAm are typically under $400m. The bank plans to issue floating rate bonds due 2017 with a 3-year average life, and 2022 fixed-rate bonds with a 7-year average life. The 144A/RegS bonds have an A/A rating and are expected to be priced the week of June 25. Standard Chartered and Wells Fargo are managing the sale.
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JPM Sends Funds to Mexico
JPMorgan has made a $250m capital increase to its Mexican subsidiaries, it says. The sum, funded to JPMorgan Grupo Financiero, will allow the global financial institution to provide additional lending capital to its Mexican customers. It represents a 62% capital increase, and brings the firm’s total capital in Mexico to approximately $653m.
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BdB Upsizes Tier 2
In what is turning out to be a decent week for debt issuance, Banco do Brasil (BdB) has raised $750m in subordinated Tier 2 bonds, taking advantage of a window ahead of a possible volatility in the market. The issuer upsized from a benchmark size after getting $2bn in demand for a deal thought to be motivated by reverse inquiry. The state-controlled bank priced the 2023 at 99.023, with a 5.875% coupon, to yield 6%, or UST +434.1bp, inside of 6.00%-6.125% guidance. The bonds were trading up 0.25 in the grey Tuesday afternoon. “Accounts have money to put to work and are willing to invest in high quality names such as Banco do Brasil and Embraer,” notes an EM investor, mentioning another Brazilian that popped up to raise funds Tuesday. Leads were heard pinning a 15bp-20bp concession against its 2022, looking at a 5.67% yield and adding 6bp for the extension of the curve. The deal represents the first bank capital raised in the dollar markets in a few months, and one of very few bank capital transactions seen globally, according to bankers following the process. North American accounts took 43% of the book, EMEA 37%, and Asia 7%, with the rest allocated to Latin America, according to a source with knowledge of the sale. Fund managers took 32%, private banking 29%, banks and financial institutions 24%, pension and insurance 3% and hedge funds 11%, with 1% allocated to other type of investor. Banco do Brasil, HSBC and Standard Chartered managed the transaction, rated BB+. Banco do Brasil last visited the market in February, making a $750m opportunistic retap of its outstanding 9.25% Tier 1 NC11 Basel III compliant perpetual bonds. It reopened at 108.50 to yield 8.488%. The bank is heard to now turn its attention to the Yen market as the RFP deadline for a possible Yen closed on Monday.
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Caribbean Development Bank Cut
S&P has lowered the credit rating of the Caribbean Development Bank’s to AA+ from AAA, as its risk management has weakened. “CDB has failed to comply with one of its internal liquidity policy guidelines, and borrower concentration remains high,” the agency says. S&P expects that the bank’s financial profile will remain stable, with new capital subscriptions offsetting lower profitability seen this past year and that it will remain so in the near future. The outlook is stable.
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Cruzeiro Troubles to Affect Peers: Moody’s
The recent government intervention in Brazil’s Banco Cruzeiro do Sul could hurt funding costs and availability to the country’s small and mid-sized banks, Moody’s says. It suggests that payroll-focused Banco BMG, Parana Banco and Banco Bonsucesso are among those likely to be the most affected, citing risk aversion as a factor. “Managements will be compelled to resize these banks’ operations to existing funding conditions, with a negative effect on business volumes and profitability,” the agency says. For the next 180 days, the Fundo Garantidor de Credito will evaluate Cruzeiro’s possible accounting irregularities and how they will impact its capital, after which the bank is expected to be prepared for sale. Cruzeiro has 0.22% total assets in the Brazilian banking system, Moody’s says.
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SIPyT Preps MXP ABS Debut
Servicios Integrados de Pasaje y Turismo (SIPyT), a unit of Mexico’s Inversionistas en Autotransportes Mexicanos Servicios (IAMSA), is preparing to issue up to MXP3.5bn ($251m) in the domestic bond market. The 15-year securitization is to be issued in UDIs or pesos as soon as July, and would be a debut debt issuance. The bonds will be backed by its bus fleet and receivables from bus fleet operations. Santander is managing the deal, rated AAA on a national scale. Crecimiento Programado is structuring agent.
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Brazilian Credit Spreads Threaten Earnings: CS
The continuing reduction of credit spreads in Brazil will likely hurt the earnings of Brazilian banks, Credit Suisse says. “Lower credit spreads should add additional pressure to banks’ profitability, further exacerbated in a scenario of lower Selic [Brazil’s benchmark interest rate],” the bank says. While public banks are leading the way, the magnitude of the decline suggests that private-sector banks are also reducing spreads. “We still see significant downside risk to our earnings forecasts, particularly for 2013 (in the order of 15%-16%), far from being priced-in by the market,” it says. The average interest rate on loans for individuals in Brazil fell to 31.8% until May 18, compared with 33.2% in April, the central bank says. CS remains “bearish” on the sector, with Bradesco as its preferred pick.