While a squadron of structured bankers from the U.S. and Europe invade Brazil and Mexico, Chile, as usual, sits quietly beyond the horizon. For the troops, domestic volumes are not big enough to get pulses racing, and cross-border opportunities have vanished.
Guarantors, however, like the comforts of the domestic market. "Chile is at the top of the list in terms of appetite and rating," said Gabriel Torres, a director at XL Capital Assurance, speaking at the Securitization in Latin America Summit, held earlier this month by Euromoney and LatinFinance (see ASR 7/14, p. 1).
The International Finance Corp. is digging its heels into Chile's domestic market as well. Following its partial guaranty of the country's - and the region's - first tuition-backed deal in early March (see ASR 5/19, p. 21), the multilateral is on the prowl for more action. It is currently looking at enhancing a tuition deal from a university that straddles the line between private and public. Since the multilateral's mandate is to fund the private sector, the final decision has not been made yet. "The group that is responsible for our investment in health and education believes that we should have the right to extend to [this institution], but they still have to go through the proper channels to confirm," said Lee Meddin, chief structured finance officer at the IFC.
Many of Chile's largest universities are privately run, yet receive federal subsidies.
Among the new asset classes that are being talked about in Santiago is advertising revenue. Securitizadora Bice is heard to be working on such a deal for a leading media company. In addition, Boston Securiti -zadora is set to become the second arm of an international bank to make its debut this year, after a unit of American International Group (AIG) structured the second tuition deal, placed in June (see ASR 6/23, p.18).
The Boston deal is a securitization of housing leases - old hat for the Chilean market - and actually marks the second attempt of the BankBoston unit to enter the playing field. Last January, the securitizer scuttled an issue backed by time deposits, after investors failed to bite in the sounding-out phase. But if successful, the current BankBoston sally into securitizations is bound to fire up competitors.
Older headaches are still around though. Originators and many investors remain in the dark about securitizations and since the tuition class debuted in March, issuance has entered a lull. An education effort underway may take some months to bear fruit in terms of voluminous transactions, said Octavio Bofill, a partner at Grasty Quintana Majlis & Cia. "If you go to originators of assets similar to ones that have been, they're fighting over banking rates, but they don't know about future flows," he said.
Regulators can be a drag as well. A string of bureaucrats has pored over a dollar-denominated US$50 million securitization of notes issued by Societe Generale Option Europe (SGOE), and the verdict on the deal is still out, according to a Santiago-based source. What has regulators nervous, apparently, is the fact that the collateral notes invest in hedge funds. Hedge funds have not been authorized in Chile and regulators have not determined if this carries over into the structured paper, crafted by Securitizadora Bice. Standard & Poor's affiliate Feller Rate and Moody's Investors Service affiliate Humphreys have rated the transaction triple-A on the national scale.