Brazil Structured Faces Tough Year

Structured finance and securitization in Brazil are in for a trying 2008 after a decline last year, according to delegates at the LatinFinance Brazilian Structured Finance and Securitization seminar Tuesday in Sao Paulo. An issuance level close to last year’s would be a good result, but delegates predict another fall. “This year will be very challenging,” says Jayme Bartling, senior director of structured finance at Fitch. Total Brazil securitization volume was $3.1bn in 2007, down from $5.3bn in 2006, according to Fitch. This year’s issuance is set to come from FIDCs, CRIs, MBS, securitization of personal loans, auto loans and trade receivables. There may also be some NPL activity and agricultural asset structures. And further tranching of transactions is anticipated to provide different investors what they need. However, the market is constrained by an unsophisticated investor base, regulation, lack of government sponsorship and no standardization. Despite the financing opportunity that presents itself from shuttered bond and equity markets, bankers are cautious on the outlook. “It will be a tough year,” says Brigitte Posch, managing director at Deutsche Bank. Unsophisticated local investors are losing out to overseas markets, where the buyside is willing to do the credit work to take lower rated exposure, she adds. However, Uqbar partner Chuck Spragins is a contrarian bull on the asset class, predicting significant growth for Brazil in 2008. He adds that demand for structured product from the country far outweighs supply, though he concedes there are problems with transparency and information flow.