Brazil's Banco BMG has closed a R$104 million (US$35.2 million) receivables investment fund (FIDC) in what appears to be the first fully sold deal of its kind. The transaction is backed by personal loans to employees of state companies and its senior shares are rated AAA(bra)' on the national scale by the newly formed Fitch Atlantic Ratings. The senior piece is enhanced by a 25% subordinated tranche. With characteristics of both an SPE and an investment fund, the shares in the structure were sold over a period of several weeks. The yield was 300 basis points over the CDI rate. "Most of the buyers were pension funds," said Renato Jabur, an associate at Levy & Salomao, which provided legal counsel on the transaction. BMG was the structurer and the collecting agent. The duration is 24 months.

Details have emerged about another FIDC, Concordia, which is a securitization of receivables originated by food company Sadia. Rated AA(bra)' by Fitch Atlantic, that deal is sized at a larger R$150 million (US$50.9 million) and carries a 20% enhancement from subordinated shares. The historical losses on the Sadia receivables pool eligible for the transaction shows a 180-day past due rate of about 1%, according to the rating agency.

Encouraged by tax advantages over traditional SPEs, FIDCs have been in the works since late last year. Brazilian elections and lingering volatility with the new administration have kept the market moving slowly. The competition from treasuries is also fierce. "We're looking at this kind of investment, but the rates on treasuries is still very high," said Luis Guedes, investment head of Eletros, a pension fund with R$1 billion under management. "It's not necessary to invest in new products yet."

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