Latin Finance - March/April 2010 - 53

Brazil structured ﬁnance Slow and Steady Progress by Ben Miller s structured ﬁnance ground to a halt globally last year, Brazil’s rudimentary market plugged on. In 2010, participants say investors’ desire for diversiﬁcation should drive growth. They are also crossing ﬁngers for more real-estate based transactions. “Everybody is still bullish on Brazil and we have started the year rating many types of decent originators,” says Juan Pablo de Molleín, head of LatAm structured ﬁnance at S&P. The agency expects to see 10%-15% expansion in Brazilian domestic structured ﬁnance transactions in its more conservative scenario. De Molleín says Brazil set a record in 2009, with about $4.25 billion-equivalent in structured transactions. Mexico, which had an exceptionally slow year as it was hit harder in the global credit crisis, generated about $4.40 billion, after posting 3-4 times Brazilian volume in the previous few years. Last year, the Brazilian market saw 27 Fundo de Investimento em Direitos Creditórios (FIDC) transactions for a total of 8.21 billion reais, according to the CVM. Real estate-backed Certiﬁcados de Recebíveis Imobiliários (CRI) transactions – the other large class in Brazil – accounted for 36 issues raising 1.22 billion reais. The FIDC total was helped by an encouraging second half that o ered 16 deals for 6.69 billion reais, including a 4.68 billion reais push from six o ers in December. The FIDCs had maturities of up to ﬁve years, with most less than three, while the CRI can go out as far as 10. The 2009 totals were a bit behind the 63 FIDC deals for 10.02 billion reais done in 2008, but it represented an increase from 28 CRI for 831 million reais in the same period. Through February 1 2010, ﬁve FIDCs closed for a total of 475 million reais, along with one CRI transaction for 70 million reais. Awaiting approval as of early February are two FIDC transactions for 143 million reais and 15 CRIs totaling 680 million. January 2009 saw three FIDC transactions close for 860 million reais and two CRI close for 43 million reais. The trend of extending maturity should also continue, says Arturo Proﬁli, founding partner and managing director of Capitânia Asset & Risk Management, particularly in the CRI space. CRIs from about 1.5 to 7.5 years average life in 2009 and could reach out to 10 years this year or next, says Proﬁli, who also expects volume to increase. Of particular interest is residential mortgage-backed issuance, > which could see a long-awaited pickup. Brazil has lagged behind other countries in the region, even as other aspects of its economy are far ahead. With the credit crisis behind it, Brazil’s small but solid structured ﬁnance market is poised to expand again. Residential real estate is becoming a reality. “The [homebuilding] market is launching several projects – there is demand for the new units, and those units will one way or another be securitized,” says Fabio Nogueira, co-founder and COO of Brazilian Finance & Real Estate. The key now, he says, is capitalizing on this building to generate transactions with bigger volume. The residential portion of CRI in Brazil at the moment is just 20%, though that should reach 50% in the next few years, he adds. “Residential real estate transactions are something that is becoming a reality, ﬁnally after so many hurdles over the years,” says de Molleín. “This year we’re conﬁdent we’re going to see signiﬁcant improvement in residential mortgage-backed issuance,” he adds. As evidence of this, he says S&P this year announced methodology for such transactions, and has started working on rating a few programs. A thirst for diversiﬁcation kept Brazil’s structured market plodding along through the crisis, and should continue to drive growth, in number, volume, tenor and type. “In the past, mostly banks would be the developers, structurers and buyers for this type of transaction. But right now the asset management community is approaching and getting more knowledge on these transactions,” Proﬁli says. In the past, it would be almost 100% banks buying for their own balance sheets, he adds. The buyer base is shifting towards a 50-50 balance with asset managers that should arrive in the next two years, Proﬁli predicts. Growth in FIDCs should include a mix of new transactions and reopenings of deals launched in the last ﬁve years. Analysts predict the return of large issuers like Braskem and Banco do Brasil. Proﬁli’s ﬁrm expects about 20% of the more than 250 existing FIDC structures in Brazil to come to market again this year. Fitch meanwhile expects 2010 to be a robust year for securitization issuances in Brazil. The agency expects auto loans, future ﬂow receivables in the oil and gas and utility sectors, and shopping center rental ﬂows transactions to be most active. LF March/April 2010 LATINFINANCE 53

Latin Finance - March/April 2010

Table of Contents for the Digital Edition of Latin Finance - March/April 2010