LatinFinance - May/June 2014 - 22

current rules, banks must be listed to issue
tier 1 or tier 2 capital, says felipe carvallo,
senior bank analyst at moody's. for now,
there is an exception to that rule for small
banks, which can issue up to $160 million
equivalent, whether or not they are listed.
But BBVa Bancomer, for example, which
is unlisted, may not issue capital to finance
growth because of that rule, he says.
the rule could change, says carvallo,
but with a range of economic and financial
reforms underway in mexico, it's probably
not at the top of regulators' agendas: "in
Brazil all the rules are well set; in mexico the
one rule that could change is the feature that
forces banks to be listed but not in the short
or medium term because the regulators are
very busy."
another missing factor for the
subordinated debt issuance segment to
grow is that local institutional investors have

FERNANDO DASSO, BCP

"We just don't have
the need right noW,
but We think the
market is in very
good condition"

to change their investment policies to allow
them to take on more risk, says fitch's
Santarelli. the debt has a rating below
the banks' rating, and calls for a higher
threshold for risk.

institutional investors - the largest
in latin american being pension fund
managers - may have less appetite for
Basel iii-compliant securities because of
their higher risk. foreign investors, as they
generally have a higher risk threshold, are
likely to make up most of the investor base
for the sales, says Santarelli.
meanwhile, chile has the largest stock
of tier 2s relative to total regulatory capital
that would need to be replaced with
Basel iii complaint issuances. But, so far,
the regulator has not released a draft of
plans for moving the system to Basel iii
compliance, says Santarelli.
"i expect chilean banks will keep issuing
plain vanilla subordinated debt as they have
been doing for many years; a new approach
toward Basel iii instruments may take
time to develop and be approved by the
regulator," he says. LF

Securitization

Asset-backed opportunities
Securitization has been slow in chile for a handful of years. local
bankers point out that last year, for example, there were no such
deals.
But 2014 could be a turning point, they say, as domestic
investors return to the asset class: underlining how the region's
growing local investor base - for example, in Peru and colombia -
may lead to more securitizations in other countries too.
"the environment for securitization is improving. We have seen
two transactions [in chile] so far this year, and expect conditions
to continue to improve," says Jose Vial, chief executive of Banchile
Securitizadora, the securitization arm of Banco de chile, the
country's second largest lender.
So far this year, chilean retailer aBcDin sold a 26.1 billion
peso ($46 million) 6.5-year senior tranche consumer loan assetbacked local market aBS. issued in march, it drew pension funds,
investment banks and family offices.
in april, chilean agribusiness company copeval sold a 24.5
billion peso ($44 million) securitized bond. Backed by farmers'
receivables, it has a tenor of seven years with a five year grace
period. Bci Securitizadora set up the SPV that issued the bonds.
although the ifc (the private sector arm of the World Bank)
backed the deal, it will increase investor awareness of the
technique and act as a catalyst for similar deals, says Janne
Sevanto, senior financial officer, at the ifc's treasury client
solutions department.
"We hope we are at the beginning of it," Sevanto says. "and
that it gives that indication to the market that this is something
everyone could look at."

22 l atinfina nce.com - May/June 2014

Part of the problem has been the lack issuance, and therefore
liquidity, in the securitization market itself. "the way to break this
cycle is to generate big securitization programs," says Vial. "in fact,
we are working on two of these right now."
elsewhere in the andes, Peru-based property owner
inversiones la Rioja priced a $40 million domestic market
securitization in november. a source working on the deal said it
was the first hotel-based bond in Peru, and likely the first singleasset hotel securitization in latin america.
Peru and colombia will both be making "baby steps" in the
securitization market, says maria tapia, senior specialist in the
financial markets division of the structured and corporate finance
department at the iDB.
"Between Peru and colombia, it's just a matter of time before
we start looking at new issuers into the market with different asset
classes."
in colombia, says tapia, the mortgage securitization market
will grow in line with the local pension fund system - just as more
appetite for securitization in the local investor base is enabling
issuance to start up again in chile.
Patricio Díaz, chief executive of administración de activos
financieros (acfin), a chilean master servicer, says chilean
institutional investors became disenchanted with the asset class in
2006, as lower base rates meant mortgage borrowers refinanced
and pre-paid their existing loans.
"now this year, [investors] just figured out that securitization
was oK, and we're just starting again," he says. LF

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LatinFinance - May/June 2014

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