MBIA might soon face competition in Brazil, as CDC IXIS Financial Guaranty (CIFG) is heard sniffing around for future flows transactions from the Latin giant. "It would make sense that [Brazilian future flows] would be their first port of call in Latin America," said a source in the guarantor business, citing the sector's strong track record and ongoing appetite. To date, Brazilian issuers have nearly monopolized the Latin American cross-border front. Every one of them that went wrapped this year did so with MBIA, as XL Capital Assurance and Ambac - MBIA's traditional rivals - are out of the picture. The two latter agencies are tapped out in the country and are unlikely to enhance another Brazilian transaction this year apart from the rare deal that might be replaced after maturing. That leaves an opening for CIFG. "They started gathering information around April," said another source familiar with the guarantor.

CIFG has approval to wrap bonds and its surety would be analogous to a monoline guaranty, according to one source. But why Latin America? A less-than-generous view making the rounds is that the U.S. unit is constrained by limited regulatory approval outside

New York. A Latin American wrap would probably not require the same rubber stamps as deals registered in another state, a source said.

Others noted that the sector holds undeniable appeal even for a newcomer like CIFG. The track record of future flows in Latin America is nearly impeccable, the only blot being a deal by Colombian airline Avianca. "We've been going on 15 years or so and there's only been one default," said a lawyer active in the sector. "These are in double-B to single-A products; that will tell you that it has exceeded performance expectations."

While Latin America domestic markets in general and Mexico in particular have become fashionable for guarantors over the last year, CIFG is unlikely to dive straight into local currency deals, one inside source said. "They'd probably want to get their feet wet in the cross-border first," a source said. Standard & Poor's, Moody's Investors Service and Fitch Ratings have all given the insurer triple-A ratings.

Officials at CIFG did not return phone calls for comment.


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