Rather than waiting for the pricing on the international capital markets to fall back to affordable levels, Argentine bank Banco Bansud, a subsidiary of Banco Nacional de Mexico (Banamex), is aggressively pursuing a securitization program in the local markets to obtain financing.
While larger Argentine banks have been able to rely on deep-pocketed foreign owners for capital, Bansud has been forced to look closer to home for liquidity.
The bank sold a $300 million tax receivables-backed bond in late December with a coupon of 12%, via manager Morgan Stanley Dean Witter. The 10-year instruments were backed by payments on loans from Bansud to Argentine provinces that are in turn guaranteed by tax remittances from the federal government to the provinces.
The paper was given a AAA local rating by Fitch IBCA and was primarily distributed to local buyers but did enjoy some foreign participation, said Gustavo Chicharo, head of institutional sales at Bansud.
This is typical of the larger sized deals coming out of Argentina's local market, said Jorge Solari, associate director of Latin American structured finance at Standard & Poor's Buenos Aires office. "When you talk about issues that are bigger than $100 million it's difficult to sell it only to local investors," he said. "The average size of a local structured deal is $30 million to $50 million.
Bansud is also preparing to issue an eight-year $30 million bond securitized by auto-loan payments by the end of the quarter and intends to launch its first mortgage-backed transaction by year-end.
"We haven't done a mortgage-backed program in the past, but from now on we'll be approaching both markets: car loans and mortgages," Chicharo said.
It's no great surprise that Bansud has been so proactive in the local securitization market, Solari said. "We have seen a lot of securitization activity in the last three years in Argentina. But usually the big banks aren't involved on the origination side, usually it's small banks selling their portfolios."
The top 10 banks in Argentina in terms of assets hold between 60% and 70% of loan portfolios in terms of auto loans and mortgages, but not one of them has moved to securitize their portfolios. Large banks, such as Citibank, Banco Santander, BBV and BancBoston prefer to enjoy the attractive revenue spreads on their portfolios, Solari said, largely because they do not face shortages of capital due to their relationships with strong foreign banks.
Bansud has been able to rely on its Mexican parent company, Banamex, for some support, said Bruce Stanforth, Latin America fixed income analyst at BNP Capital Markets. "[Bansud] would not have survived independently over the past few years if Banamex hadn't kept bailing them out," he said.
Nonetheless, Banamex's support cannot compare to that afforded by U.S. and European banks to their subsidiaries, and Bansud has been forced to look elsewhere for much-needed capital, hence its decision to securitize its loan portfolio.
"Bansud's performance hasn't been very good in the last few years," said one Buenos Aires-based analyst. "With the merger of big banks it is finding it difficult to remain competitive. [Bansud] needs capital and is trying to liquidate some of its assets and is launching all these deals."
Although Bansud pioneered the securitization of Argentine provincial tax receivables in July 1999, its focus going forward will be on issuing in the auto-loan and mortgage mart because it has already exhausted its portfolio of loans to Argentine provinces, Chicharo said.
But this has not prevented the bank from acting as an underwriter of tax receivables deals, as evidenced by Bansud's role as co-arranger with Banco Frances of a $70 million bond, issued by the province of Chaco last week. The transaction received a AA local rating from Fitch IBCA and was guaranteed by tax remittances from the federal government to Chaco's administration.
Bansud was founded in 1995 by the merger of Banco del Sud, Banco Shaw and Banco Federal Argentino. The bank is 56% owned by Banamex and specializes in loans to individuals and small- and medium-sized businesses.