Banco de Chile's securitization arm is roadshowing the country's biggest ever MBS. Sized at the local currency equivalent of US$86.4 million, the deal will push the total housing sector bonds in Chile - which include securitized leases and other like assets - beyond US$500 million (see ASR 9/16 p. 32 for Chilean ABS record).
With domestic interest rates slumping at all-time lows, chances are the deal will earn BanChile Securitizadora a generous excess spread over the real 8.91% rate on the residential mortage pool. But the lead, say sources, may be too ambitious in pushing for rates approaching those of PRC treasuries.
"After we met, I was left with the sensation that [BanChile] wanted to transfer government risk to this deal, but it's really more than that," said one pension fund official, who conceded that he would certainly buy in at the right price.
A source close to the deal said that investors are enticed. "We've had a good reception," he added. "There's definitely interest out there."
Others expect pension funds and insurance companies to try to squeeze pricing advantage from the fact that a rival securitization agency, Bice Securitizadora, is also coming to town before Christmas. Bice hopes to place a US$66.5 million MBS in late December (see ASR 11/25 p. 17).
Slated for the first week of December, BanChile's deal is split into three maturities. A ten-year piece is worth 1.5 million inflation indexed units (UF) (US$35.4 million), an 18-year amounts to 1.9 million UF (US$44.9 million) and finally 271,000 UF (US$6.4 million) is allocated to a subordinated tranche. Standard & Poor's affiliate Feller Rate and Fitch Ratings have rated the 10-year triple-A on the national scale. The 18-year holds a double-A rating.
Chilean dealmakers often divide bonds into two maturities. The shorter maturities are marketed to pension funds, while the longer tenors go to insurance companies.
The yield on eight-year PRC is now hovering at 3.2%, while ten-year PRCs are bearing 4.1%. One trader said the best BanChile can hope for is a spread in the ballpark of 100 basis points. The last MBS to close was a trim 21-year deal by ABN Amro Securitizadora. Rated double-A by Feller and Moody's Investors Service affiliate Humphreys, that transaction priced at 6.2% in late August.
The ratings on BanChile's deal are bolstered by an overcollaralization, which stems from a projected hefty gap between the final yields and average rate on the pool. As of November, the total face value of the mortgage pool was 2.9 million UF (US$68.5 million).
The fact that there's not a bad loan in the bunch adds support as well. The originator is Banco del Estado, a state-owned bank rated AA+' on the national scale by Feller. While implicit support from the government buoys Estado's rating, low efficiency and tight operating margins keep it shy of triple-A. On the other hand, the bank's sheer size gives it enormous pull in the mortgage market. Estado holds a third of all residential mortgages.
Though Chilean securitizers are branching out into new assets, the housing segment overshadows all other asset classes. And phenomenally low rates continue to spur the generation of new mortgages. "There's still massive activity going on in the sector," said one source.
