BBVA Colombia has a consumer loan transaction in the works that's the first of its kind in the country. The only deals that have been done in the vicinity of this asset class is a securitization of payroll-deducted loans two years ago and a credit card transaction about ten years ago, according to a Bogota analyst familiar with the sector.
The deal's been delayed due to market conditions but is expected in the first half of this year, a market source said. Tightening monetary policy and new securities rules dampened bond activity in the Colombian debt market in 2007, according to a recent report from Fitch Ratings.
The BBVA deal, which is self-led, follows a strategy of local financing that the Spanish bank has been pursuing in other Latin America countries as well (see p.21). Totaling Ps300 billion ($161 million), the transaction is split between a two-year A series sized at Ps75 billion, and a four-year B series worth Ps225 billion. Local Fitch affiliate Duff & Phelps rated the deal AAA', which is effectively a national scale grade. The agency stressed against a worst-case scenario of a 25% loss on the collateralized portfolio.
At the time of the rating agency's pre-sale released in November, the underlying pool consisted of 17,723 loans averaging Ps21.6 million, while the average rate was 16.6%.
The loans totaled Ps382 billion, giving the deal an overcollateralization of 27%.
The market source said that other banks could follow in the footsteps of BBVA, which is one of the largest in the country. In addition, utility companies that finance the purchase of household appliances through their billing systems have been eyeing this form of financing, according to the Fitch report.
The asset class has certainly grown briskly over the past five years, from a consumer loan volume of nearly Ps7.0 billion in June 2002 to Ps33.9 billion in November 2007 (see graph). In addition, while past-due loans as a percentage of outstanding loans has climbed from its low point of 3.9% in December 2005 - hitting 6% in November - the ratio remains a far cry from the ugly days of mid 1999, when it hovered over 20%.
Colombia suffered a financial crisis beginning in 1998. The resulting sharp contraction in origination exacerbated the situation by boosting unemployment, which further weakened the capacity of borrowers to pay back their loans.
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