LatinFinance - Special Edition - August 2013 - 29

2007, spreads widened on the
mexican deals they wrapped.
investors, spooked by the
US subprime crisis as well as
by specific worries about the
sofoles, stepped back. Defaults
forced the sofoles out of the
issuance markets in 2009, the
same year that rising spreads
also pushed banks out. in
the depths of the crisis, just
infonavit and its peer fovissste
continued issuing mortgage
securitizations in mexico.
“it was difficult, there
was little demand and the
rates were high,” says Jorge
márquez García, head of the
securitization program at
infonavit. “at the start of 2008
we were paying spreads of
100 to 150 basis points [over
Udibonos]. in 2009 they were
at 250 basis points.”
Yet the relentless growth of
mexico’s pension funds, the
afores, is driving a return of
the country’s securitization
market. the afores buy around
40% to 45% of infonavit paper.
Private wealth and insurers are
also keen buyers.
in June 2013, BBVa
Bancomer sold a 4.2 billion
mexican peso ($320 million)
20-year RmBS – the first such
deal by a bank since 2009.
and demand for infonavit’s
february bond issue was seven
times the 3 billion peso size.
that allowed it to squeeze
pricing to 196 basis points – and
hit its lowest-ever yield of 3.3%.
“the pace of issuance
growth has been lower than
the pace of asset growth at
institutional investors,” says
márquez. “assets under
management at the institutional
investors – asset managers,
pension funds, insurers – have
grown a lot. there is not
enough attractive supply to
meet the demand.”
Going global
Growth of securitization
markets across latin america
will vary much by country. in
Brazil, banks must allocate

Structured finance deal of the quarter century

AA2000
$300m securitized amortizing bond, 2010
future flow receivable securitizations have been useful – in some cases crucial
– for latin companies to overcome tricky operating environments to raise cash
for the past quarter century. aeropuertos argentina is awarded the best structured finance deal for not just showing the funding format is still relevant, but
for advancing it through innovation, giving investors comfort in a difficult jurisdiction. it was also smoothly executed under challenging conditions as one of
the few corporate issuers out of argentina since the government’s default.
When investors looked at the national airport operator, they were cautious
not just about the macroeconomic backdrop in the country but also the government’s history of industry intervention. So in 2010 when aa2000 needed
to fund airport upgrades around the country, securitizing receivables was one
way forward. However, putting the B2/B rated secured amortizing note together was complex. the bond is backed by a split of revenues: close to half of
the airport operator’s passenger use fees, dollar receivables collected offshore
through the iata system, as well as the bulk of its duty free revenues.
the borrower must also keep 125% of the two next principal and interest
payments in dollars in an offshore account.
the careful structuring paid off. Despite a December sale, leads Banco
macro, credit Suisse and morgan Stanley raised nearly $2 billion of orders for
aa2000’s first cross-border bond, and squeezed the yield down by 25 basis
points to 10.75%. the bond has continued to perform.
“During the first year, the market value frequently exceeded its nominal
value, winning investor recognition,” says Raúl francos, ceo of aa2000. LF

65% of their deposits to
mortgage lending, making
RmBS unnecessary. “Potential
changes to the rule could see
the market expand rapidly,”
says Ben Roger-Smith, director
of structured finance at HSBc.
“there is a lot of potential
in Brazil,” says Katia Bouazza,
co-head of global capital
markets, americas, at HSBc.
“a large portion of the market,
real estate, uses very little
securitization. and Brazil
is going through structural
changes. the middle class is
growing and that will increase
demand for loans and create a
new demand for securitization,
as financial institutions may not
be able to continue to finance
all these loans.”
for others, the next step is to
attract foreign investors to the
securitization markets.
international accounts
are increasingly interested in
dabbling in latin america’s
local currency bonds,

particularly in the more liquid
markets like mexico. But assetbacked instruments offer even
more hurdles for dollar-based
investors to participate than
straight corporate bonds.
not only do accounts need
to hedge against moves in
Jorge Márquez garcía

“InstItutIonal
Investors – asset managers,
pensIon funds,
Insurers –
have grown a
lot. there Is
not enough
attractIve
supply to
meet the
demand”

the currency, they also have
to factor in local interest rate
changes that could affect the
flow of payments.
“You have that interest rate
differential and fX differential,”
says morcom. “So all else being
equal, you could have zero
asset losses and still lose money
because of fX or interest rate
swings.”
nevertheless, it is on
the agenda for some. in
2012 colombian mortgage
securitization specialist
titularizadora colombiana
revived plans first conceived in
2007 for a cross-border issue,
although such a deal has yet to
come to market.
for others, surging demand
at home makes international
issuance less of a priority.
“international investors are
interested in these deals, but we
have enough demand in mexico
that we don’t need to issue
internationally,” says infonavit’s
márquez. LF

August 2013 - 25 Years - l atinfina nce.com 29

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LatinFinance - Special Edition - August 2013

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