World Bank affiliate the International Finance Corp. confirmed last week details of its involvement in the newly established Argentinean secondary mortgage company, Banco de Credito y Securitizacion (Bancs). The IFC set up the company with Argentinean banks Banco Hipotecario and IRSA, and together they are looking at bringing in a strategic partner to help bolster the project.

As things stand, the three parties have combined for a total equity investment at $250 million. BH is thought to be the major shareholder with 40%, IRSA 10% and the IFC 20%, leaving 30% available for the strategic partner. The IFC, however, said its own holding - which it says is in a range between 10% and 30% - might change over time to suit the needs of the company.

"There will be flexibility as to our percentage," said Marcos Brujis, an investment officer at the IFC. "It has been agreed by ourselves and our current partners that we may even reduce our stake if it suits the conditions for the strategic partner to come in."

Michael Bookstaber, a fellow investment officer at the bank, said that Bancs was fully operational, and was looking towards a mortgage-backed issue. "The company has been established for a while and it's doing business," he said. "It's presently acquiring mortgages and is planning for its first securitization. I think it is likely to happen this year but that depends on market conditions."

In terms of its own role, the IFC has board approval to provide a credit support facility of up to $100 million for any future MBS transactions issued by Bancs, which will be leveraged depending on the requirements of the deal.

Aside from that, it sees itself as a link between the different players in the market. "As in most IFC investments, we take a relatively passive role," Bookstaber confirmed. "Our role is more a case of catalyzing the different players in the market to establish this on a market-wide basis, to use our good offices and to broaden this thing so that it really does serve the entire country."

Bookstaber believes Argentina was the logical place in Latin America to establish such a company. "We see that Argentina has a lot of positive things to it that are required for the establishment of a secondary market," he said. "Residential mortgage lending has been going on for a number of years, there is great stability to the economy. Probably unique to Latin America, Argentina has a history of MBS so the legal structure is in place and it has a strong reputation with domestic institutional investors and international investors." - RD

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