Securitization plans are moving forward apace at one of Argentina's most active securitizers, Banco de Galicia y Buenos Aires. On the heels of two deals backed by credit card receivables for its subsidiary Tarjeta Naranja and another similar transaction in the pipeline the bank is getting closer to launching its first international mortgage securitization.
The transaction will be managed by Merrill Lynch and might feature a political insurance policy from the Overseas Private Investment Corp. (Opic), the U.S. federal agency created to support U.S. business interests in developing countries.
The offering, which will be for at least $100 million, will grant Banco de Galicia international exposure. "From a strategic point of view, accessing the global markets is of key importance to the bank," said a source familiar with the offering.
Aside from two domestic and four international MBS deals from Banco Hipotecario Nacional (BHN), only a couple of small mortgage deals have been completed in Argentina.
In that context, the deal from Banco de Galicia, the country's largest commercial bank in terms of assets and branches, is likely to add credibility to the local mortgage market.
The transaction could be doubly significant, as it may become the first Latin American asset-backed transaction with an Opic political risk insurance.
"With the advent of Opic's political insurance policy for the capital markets, structuring these type of deals makes more economic sense for banks such as Banco de Galicia," said a source working on the transaction. "I believe that this is the beginning of a trend."
The recently pulled Opic transaction for Telefonica del Peru, however, might cast a shadow on the policy's asset-backed debut. In addition, Opic's insurance policy does not cover the risk of a currency devaluation. "Given the fact that the receivables are generated in local currency, while the borrowing is done in dollars, currency depreciation is a very big risk," said a source.
Other sources argued that, since loans in Argentina are dollar-denominated and the economy is pegged to the dollar, that risk is less significant than in other Latin American countries.
Though the deal was initially expected to launch before year-end, sources said it would not now hit the market until the first quarter of next year. The national elections scheduled for October, coupled with Y2K worries, were said to be the main reasons behind the delay.
The transaction is likely to compete with BHN's $150 million offering, which was expected in the market at the end of September but is now rumored to be on hold. "Investors will have to weigh both deals and decide with which they feel more comfortable," said a source. "BHN might have the advantage of some name recognition, but it's too early to tell."
