At least one auto loan-backed deal is coming down the pike in Mexico, with Scotiabank Inverlat rumored to have the mandate, according to sources. The transaction, a debut for the sector, is unlikely to spur a mad rush in the short term, but a few factors point to further deals next year.
For starters, originators are talking to bankers about branching out from their myopic reliance on plain-vanilla issuance. So far, Ford Motor Credit, GMAC, Volkswagen and DaimlerChrysler have issued paper.
ABS would make sense for these issuers, said one banker. One catalyst could be the ratings pressure facing their respective parent companies. "They've gotten downgrades and so they might not be as free to provide a guaranty," the banker said.
Thanks to the parent guaranty, corporate issuance by Ford and GMAC have been rated triple-A on the national scale by Moody's de Mexico and Fitch Ratings, and double-A plus by Standard & Poor's. The parent guaranty has boosted paper from Volkswagen to triple-A at all three agencies. S&P has been slightly less sanguine about Ford and GMAC because the parents do not have the kind of rating to justify a triple-A on the national scale.
One banker argued that even with a weaker guaranty, securitization is still not cost-effective for these originators. "It wouldn't be worth the extra cost of securitization to get a deal just one notch higher," the banker said.
But it's not so easy to dismiss the other talked-about catalyst. Pension funds face caps on exposure to individual corporates and, as heavy repeat issuers, GMAC and Ford, at least, are pushing the limits. "The Afores [pension funds] can't take their naked risk anymore," one banker said, adding that ABS may be necessary to keep the pension money flowing.
In addition, volumes are reaching critical mass in the asset class, as origination roars ahead. "Auto loans have been growing strongly in the past few years," said Ursula Wilhelm, director of financial services ratings at S&P in Mexico City. Auto loans in the banking sector have been rising at an annual clip of 20%. Growth in the corporate sector is comparable, Wilhelm said.
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