As Argentina entered the final stretch of election season (see front page), its next-door neighbors yielded some developments on the securitization front. Brazilian Securities was heard approaching the close of its seventh real estate transaction, backed by mortgage loans. Totaling R$7.96 million (US$2.6 million), the deal is going entirely to the Inter-American Investment Corp. (IIC), the private sector financing arm of the Inter-American Development Bank. Moody's Investors Service rated the transaction Aa1.br, thanks to a 30% combined enhancement from a subordinated class and residual certificates. Typically, Brazilian Securities sells its deals to the IIC, which gradually filters them into the market. The meager size of the transactions is a major impediment to attracting pension funds in an initial sale, sources said. But that may change. Dutch Development Bank FMO and the International Finance Corp. are heard lending the securitizer US$40 million to purchase a loan portfolio bulky enough to pique the interest of investor heavyweights.
Meanwhile, in Chile, Moody's affiliate Humphreys has assigned an A-' on the national scale to a deal for the Universidad de Concepcion. The structurer is Securitizadora Interamericana, a part of American International Group (AIG). The transaction is sized at 2 million inflation-indexed units (US$48 million) and carries a legal final maturity of 10 years, with a duration of eight years. Collateral is comprised of future tuition and funds that the federal government allocates to the university. Under Chilean law, a group of universities that predate changes to the educational system in the early 80s are given a piece of the government's annual budget.
Real estate held by the university adds further backing to the transaction. The structure is designed to trap flows from real estate slated for sale, about a third of the total. Interamericana is acting as servicer on the deal. In Chile, the structurer of a deal often services it as well, unless administrating the assets is too complicated. Even when servicing is outsourced, the securitizer is legally responsible for managing the collateral.
Standard & Poor's affiliate Feller Rate will assign the mandated second rating. The A-' it has garnered so far may make the transaction a tough sell among pension funds. The institutional investors tend to shun anything below AA', though some recent single-As have been picked up by an intrepid few.
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