Auto loan ABS might be coming down the Colombian pike this year for the first time, thanks to an appetite for alternative funding sources and a new law authorizing the establishment of non-mortgage securitizers.
"We hope to do a first issue in the second half of the year," said Alberto Gutierrez, president of RMBS securitizer Titularizadora Colombiana, adding that his team has filed with the Superintendency of Finance to create Multiactivos, a new agency that would securitize non-mortgage assets.
Multiactivos - which translates to "Multiassets" - would take a similar approach to auto loans as Titularizadora has with mortgages, issuing on a regular basis under a program, Gutierrez said.
At the end of January, the Ministry of Finance and Public Credit issued Decree 230, which authorized the creation of agencies securitizing non-mortgage assets. While Colombian originators have been issuing ABS of a broad sweep of assets for many years, agencies specializing in aggregating and securitizing third-party collateral could exist only by law in the case of mortgages, and in that world Titularizadora has held a virtual monopoly since 2002.
Data from Titularizadora that cites the Superintendency of Finance estimate the volume of auto loans in Colombia at $2.34 billion as of September 2009, with $1.33 billion held by banks and $1.01 billion by Commercial Finance Companies (CFCs). In auto leases, the country's total reached $1.81 billion, with CFCs as the only originators. Banks are newcomers to the business of leasing, as they were only recently given regulatory permission to offer the product.
The Superintendency does not collect performance data specifically on auto loans or leases, with the sector bundled under the general rubric of "consumer debt," according to a communications official at the government agency.
FinandinaHonks for Auto ABS
One originator expecting to provide collateral for Multiactivos' maiden issue is Finandina, a CFC that ranks among the three largest originators of auto loans and leases in the country.
"[The debut deal] is going to be a test to see how this product operates," said Jorge Mejia, managing director of Finandina. "We've been collaborating with [Titularizadora's team] to help them develop a model."
On track to convert into a bank, Finandina manages a portfolio of Ps650 billion ($337 million) of car loans and leases, roughly split evenly between the two. Using the Superintendency's dollar figure for the industry, this would give it a market share of over 14%.
Among the major differences between CFCs and banks in Colombia is that the former are not subject to minimal capital requirements and cannot offer checking accounts. Finandina had been meeting the requirements to become a bank for some time, Mejia said. The CFC's only hesitation was the regulatory prohibition on banks entering the leasing business; once this was lifted, the originator began the switch-over process.
Presently, Finandina relies on four major sources of funding. One is time deposits. A second consists of bond issues in the local market, either bearing a fixed rate or as floaters tied to the DTF, the country's main benchmark rate. Finandina has nine vanilla bonds outstanding, with a tenth on the way over the next few months, Mejia said. A third major source of financing is from development banks such as Bancoldex and Finagro. This financing is analogous to how development institutions often lend to clients in other parts of the globe, with Finandina basically acting as an intermediary between the lender in question and the final borrowers. Finally, the bank offers savings deposits, but Mejia said this is a new product and not yet a meaningful source of capital for the originator.
The managing director added that securitizing chunks of Finandina's portfolio would not be driven by cost so much as the search for an alternative source of liquidity and a better duration match for auto loans.
Following last year's flat growth, Finandina's loan and leasing portfolio should rise by between 10% and 15% this year, according to Mejia. "Over the last four months the vehicle market has been growing," he said, projecting a continued increase this year. Sales of new cars in Colombia slid 13% during 2008, a downturn that bled into 2009.
Mejia said Finandina's book grew at an astonishing annual rate of 36% from 2000 to 2008. This followed an economic crisis that gutted much of the country's financial sector in 1998-1999. As Colombia leaves behind its more recent slump, he sees a bright future for strong growth in auto sales, especially given that Colombia's per-capita ownership is low by regional standards.
The multilateral International Finance Corp. (IFC) took a 10% stake in the company during the second quarter of 2008. Local rating agency BRC Investor Services rates Finandina's long-term local debt 'AA+'.
Adding Lanes
Titularizadora's Gutierrez said Multiactivos would possibly branch into other assets but only after introducing auto loan ABS. The law would permit the new agency to securitize any type of collateral outside of mortgages.
Car loans are not the only assets that offer good potential for multi-seller deals. Origination in both consumer and corporate loans has been picking up since the country emerged from its recent downturn in the fourth quarter of last year.
Some Ps2.8 trillion in consumer loans was originated in November 2009, a growth of 4.6% from Ps2.7 trillion in the same month the previous year. Commercial loan origination grew at a significantly faster pace of 12.3%, reaching Ps22.2 trillion in November. Meanwhile, the country's total book of consumer loans, which include auto loans, reached Ps41.2 trillion, up 0.96% from a year earlier. Corporate loans hit Ps93.5 trillion, down 0.29% from November 2008.
Lower interest rates have been one of the drivers of fresh origination. The weighted average interest rate on consumer loans was 23% in November 2009, a drop of 523 basis points from 28.23% a year earlier. In the same period, the country's central bank slashed the benchmark interest rate to 3.5% from 10%.
With Titularizadora's background in mortgages and its banking shareholders, Multiactivos would have a natural advantage over potential rivals in securitizing financial assets. Apart from the 21.25% stake in the mortgage securitizer held by the IFC, the bank's owners include such local heavyweights as Banco Colpatria and Bancolombia.
All the same, it us unclear whether Multivalores will be able to replicate Titularizadora's RMBS monopoly in non-financial asset classes, should they prove an attractive opportunity for specialized securitizers. Officials at the Superintendency of Finance did not answer questions about whether they were fielding additional requests to set up a non-mortgage securitizer
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