The securitization arm of Chile's Banco de Credito e Inversiones has structured two credit card-backed, peso-denominated deals that look set to become the first such transactions in the domestic market, according to Gerardo Spoerer, CEO of BCI Securitizadora. "We expect them to come out this year," he said.
The larger of the two is worth roughly Ps70.2 billion (US$100 million) and is effectively a securitization of future debt from the holders of credit cards issued by Ripley, a Chilean department store that has been growing over the last few years. Its stores have sprawled from lower to higher income segments of the country, spurring a similar change in the makeup of cardholders. The deal is a future flow transaction of the total consumption of a set carholder pool. It is about 40% overcollateralized, which helped it garner a triple-A rating from Moody's Investor Services affiliate Humphreys and Standard & Poor's affiliate Feller Rate.
Holders of Ripley's card can make purchases in several major chains outside of the department store. In addition, they can draw cash on the card. Currently, there are roughly 1.8 to 1.9 million cards issued, with 900,000 of them active.
Though aggregate figures on specialized credit cards are hard to come by in Chile, data suggest a recovery of all consumer credit following a severe downturn after the post Asia Crisis. A few years ago, astronomical interest rates engineered by the Central Bank to defend the currency left many retail borrowers traumatized. A rebound is underway however, with consumer credit from banks now rising 7% annually, according to Aldo Reyes, a manager of Humphreys.
The other deal BCI is structuring is backed by a credit card for purchases in downmarket store La Polar. That transaction will amount to Ps25 billion (US$35.6 million), Spoerer said.
BCI's CEO is optimistic about the deals' prospects. "Banks have just introduced interest-bearing checking accounts, so this will be a natural hedge for them," he said. BCI is also courting pension funds and mutual funds. The top-notch rating is sure to draw more staid investors.
For the domestic market, the deals could herald a monumental shift away from indexed debt. Over the last few years, Chile's domestic debt market has been dominated by bonds denominated in inflation-indexed units (UF) from corporates, mega-projects and the government. With credit-card assets in nominal pesos, the sector's deals are all expected to carry plain peso denominations.