The arrival of Carnaval in Brazil typically lulls financial markets into a weeklong slumber. So this year domestic issuance won't resume until March, but players still had a few stories to tell before the party drowned them out.
Boutique bank Integral Trust, for instance, sold in full the first tranche of a receivables investment fund (FIDC) for Omni Financeira, an auto-loan lender specializing in used vehicles for a subprime consumer class. This initial tranche of shares amounted to R$10 million (US$3.4 million) and demand has already spilled over into the next two placements of R$10 million apiece, according to Carlos Fagundes, director of Integral, which structured the deal. Firm commitments for the upcoming tranches have compressed the calendar for the entire fund, sized at R$60 million (US$20 million). An initial 12-month timeframe has been shortened to the first half of the year.
"Pension funds have been very receptive," Fagundes said, citing "a very low credit risk and very aggressive spread." The fund offered a targeted yield of 115% over the benchmark CDI rate, slightly wide of comparables. Fitch Atlantic gave the senior piece of the deal AA+(bra)' on the national scale, citing such enhancements as a 25% subordination.
Fagundes said the spread would inevitably come down for a second FIDC already being planned by the originator. Mellon Brascan DTVM is the manager of the fund, a role akin to a trustee in standard securitizations.
Omni focuses on vehicles that are more than 10 years old. It has 87 branches dispersed through eight states, including economic powerhouses Sao Paulo and Minas Gerais.
GP looks ahead
Elsewhere in the inexorably expanding universe of FIDCs, investment bank GP Investimentos expects to issue in a few months another R$50 million to R$100 million of GP Aetatis II, a fund that purchases residential mortgages and other real estate receivables. An initial R$50 million (US$17 million) in shares in the close-ended fund was fully sold by Dec. 23. The bank plans to reach R$200 million in issuance by the end of the year. The benchmark yield was 10.5% over wholesale price index IGPM. "This deal does not have senior and subordinated shares, so the yield is merely indicative," said Maximo Lima, director at GP Investimentos. Most FIDCs have a subordinated/senior split. Instead, the deal counts on 15% overcollateralization. Fitch Atlantic has rated it A(bra)' on the national scale.
GP hunted far and wide for the collateral to the deal. "We buy the mortgages from the market; there isn't a [single] originator," Lima said. "We shop around for the best rates." The fund has a three-year maturity.
GP Aetatis I, a fund focusing on commercial real estate, has yet to go public. Still, GP itself has already issued and bought R$20 million in shares of that vehicle.
Prior to the Aetatis deals, Altere Securizadora, a unit of GP, closed an R$32 million (US$11 million), five-year transaction of real estate receivables. Its parent company structured the deal. Known locally as CRIs, real estate transactions in Brazil are closer in structure to traditional securitizations than the FIDCs. Developer RTS Administracao e Participoes was the originator of the recent deal and state bank Caixa Economica Federal was the obligor. The deal included a performance bond from Aurea Seguradora de Creditos e Garantias, which has Bradesco Seguros as a stakeholder.
BASF-linked deal looms
Coming up in the CRI market is a transaction for up to R$37 million (US$12.5 million) from Imigrantes Securitizadora, which has probably been established exclusively for this transaction, according to a source. The deal has an eight-year maturity and is backed by receivables linked to usage rights between real estate fund Patria FII and BASF, the local unit of the global chemical company.
Last December, BASF sold and transferred its ownership in property containing its headquarters, to Patria FII and El Trench Empreendimentos e Participacoes. The company then purchased, from Patria, a lease on the land. Its payment to Patria, at R$6.8 million (US$2.3 million) a year for 10 years starting Dec. 31, 2003, is the collateral for the deal.
Fitch Atlantic Ratings rated the deal AA-(bra)' on the national scale, citing BASF's credit standing and its 93-year experience in the domestic market. The unit is the third largest producer in the Brazilian agro-chemical sector and the leading manufacturer of decorative paints. Those two business lines "contribute significantly to the group's consolidated operations...justifying the continued capital investment and financial support offered by the parent to its Brazilian subsidiary's operations over recent years," Fitch Atlantic said.
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