Edomex ABS Clone Seen Unlikely

The State of Mexico’s (Edomex) recent securitization of funds generated by the sale of residential property titles is likely to remain the only one of its kind for now. The transaction was the first of its kind and had raised hopes such a deal could be replicated in other parts of the country. But Osvaldo Santin Quiroz, director general of the Instituto de Seguridad Social del Estado de Mexico y Municipios, suggests that this is unlikely. “That was the end-result of a 4-year process that entailed several legal and organizational changes,” Quiroz tells LatinFinance. Any other state government wanting to follow Edomex’s lead would likely have to make similar changes to laws governing the management of title insurance income as well as organizational changes to their bureaucracies in order to allow such a structure to be managed. Edomex in August issued the innovative MXP4.065bn 20-year deal securitizing future flows of income from residential property title fees, which it had been working on since the middle of 2009. The 2030 Edomex deal has a 14-year average life, pays fixed rate and is divided into 2 tranches. An MXP2.765bn tranche features a 100% guarantee from OPIC and was priced at 132bp over Mbonos, paying a 7.86% coupon. It is the first time OPIC has fully guaranteed a transaction in the local market outside the US, say bankers at the leads. The MXP1.3bn tranche carries a 30% first loss guarantee from CAF, it is rated AA on a national scale and was priced at Mbonos plus 359bp, with a coupon of 10.13%. Banamex and HSBC managed the sale, which was structured by MBIA. Quiroz was speaking on the sidelines of the LatinFinance Infrastructure and Sub-Sovereign Finance in Mexico Summit held last week in Merida.