MIAMI - While last week's Information Management Network Spring ABS 2007 conference provided a good primer on the Brazilian structured finance market for the uninitiated, participants from Sao Paulo were also holding forth on what's ahead for entrenched players. On the lips of a few players was Companhia Paulista de Trens Metropolitanos (CPTM), a state-run company that operates Sao Paulo's commuter trains.

CPTM recently collateralized receivables from 21 stations in a future flow transaction arranged by Rio Bravo Investimentos. Other state companies could follow suit because they face tight debt restrictions that are bypassed in the future flow structure, according to Chuck Spragins, a partner at Uqbar, a Brazilian consultancy specializing in securitization. "This should pave the way for all kinds of government-owned companies to do the same," he said.

CPTM was a mandate that had been sought by Banco Votorantim, said Emilio Otranto, who is in the capital markets group at Votorantim. But while Votorantim lost out to a competitor, the arranger is still staking claim to virgin territory on another front: distressed assets. Otranto said the bank is readying a distressed auto loan transaction for client BV Financeira. "We've created a new [receivable investment fund] using this kind of asset," he said. Due to launch by the beginning of June, the deal amounts to R$600 million ($298 million). BV Financeira is known for its bulky issuance, having issued one auto loan-backed deal last year that was about R$1 billion.

Also on the minds of Brazilian players was the participation of monoline insurers and other kinds of guarantors. So far, none has enhanced a domestic securitization, although Frances' Coface recently threw its hat in the ring, announcing that its guarantee was now available in the reais market. Once it clinches a deal, players are hoping that others will follow.

Overall, there is plenty of room for growing collateral in Brazil. On the consumer front, the debt load carried by Brazilians is, on average, much lower than in the U.S.

If the country continues to avoid major financial upsets as it has over the past several years, people will feel more comfortable with taking on debt. "We have a tremendous space for people to leverage themselves," said Luis Otavio D'orfani from the Brazilian capital markets team of Standard Bank. "[But] this depends on stability."

(c) 2007 Asset Securitization Report and SourceMedia, Inc. All Rights Reserved.

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