Even for Mexico, on a tear for most of this year, it was a bit much to produce a pair of monumental deals at the start of the holiday season. In a span of two days, Credit Suisse First Boston and Citigroup unit Acciones y Valores debuted transactions in the housing and sub-sovereign sectors, respectively. Both won respectable pricing and represented long, hard months of molding new kinds of financial architecture.
For CSFB, a mortgage-backed bond also marked the bank's debut as an underwriter in the peso market. "We didn't have a presence before; we have it now," said Felipe Garcia, vice president of Latin American debt capital markets at the bank. Opened for business since mid-2002, as underwriter the Mexican unit of CSFB had been working only on cross-border transactions for local issuers. That is until it snagged a mandate from originators Su Casita and GMAC Hipotecaria on what would turn out to be the country's first proper MBS.
Sized at 177.9 million inflation-indexed units (UDIs) (US$53 million), the deal priced on Dec. 3 at a real rate of 5%, roughly 125 basis points wide of the interpolated value of the Mexican treasury curve. No UDI-denominated treasury was a perfect match for the deal, which has a final legal maturity of 16 years and an expected average life of 5.7 years. Benchmarking was apparently not much easier elsewhere in the bond market. There are outstanding toll-road deals with similar maturities, but the asset class is dissimilar. Some investors apparently looked to paper from housing agency Sociedad Hipotecaria Federal (SFH), sources said.
Rival bankers and other corners of the market had raised questions about the distribution capability of the bank as a newcomer. The result is sure to dispel those doubts. Five percent was at the tight end of expectations and buyers came from all of the four usual circles: mutual funds, pension funds, insurance companies and banks. The yield even had earlier skeptics singing a different tune. "Not bad at all," said one of the converts. Nevertheless, CSFB officials said the bank was not closed off to working with other banks in future deals.
Moody's Investors Service and Standard & Poor's rated the transaction Aaa.mx' and mxAAA' on the national scale, respectively. Su Casita provided 71% of the underlying pool, while GMAC Hipotecaria, in its own debut securitization, provided 29% (see ASR p.1, 11/17.)
That mix could change in future deals off this MBS program, which is registered for 5 million UDIS (US$159 million). Legal counsel for CSFB on the deal was Creel, Garcia-Cuellar y Muggenburg. The originators used Mijares, Angoitia, Cortes y Fuentes.
One day after this landmark transaction, Citigroup unit Acciones y Valores made a splash in the sub-sovereign sector, pricing a voluminous Ps2.5 billion (US$223 million) deal for the Federal District, which is the core metropolis of the sprawl that makes up Mexico City. Rated triple-A on the national scale by both S&P and Fitch Ratings, the transaction priced at 75 basis points over six-month Cetes, the tightest ever for a sub-sovereign transaction. "I think we managed to satisfy everyone involved; we are very pleased," said a banker on the deal. As in the CSFB deal above, investors of virtually every stripe bought in. The transaction hit a few rough patches mid-year, with documentation issues and other regulatory hurdles thrown in its way.
The legal final maturity is six years, the average life, 5.5 years. The structure was unprecedented, if somewhat inapplicable to peer issuers. By law, the Federal District can't issue directly into the market. So under the structure, Citigroup provides a loan to the FD equal to each series. The credit is channeled through the central government. Bond payments are backed by federal co-participation revenue, the customary asset among sub-sovereign issuers. Legal counsel is White & Case.
Preceding Mexico City by one day, Nuevo Leon returned to market with a Ps738 million (US$66 million) deal priced at 220 basis points over six-month Cetes. Backing the transaction are payroll taxes. Monterrey-based brokerage Value Casa de Bolsa led the deal and Thompson & Knight provided legal counsel. Fitch rated the transaction triple-A on the national scale. Pricing slightly tighter than a Ps978 million (US$87 million) deal launched off the same program in late August, this series enjoyed moderately higher overcollateralization, said a source on the deal. The most recent issue was executed under a different administration as well. A governor from the Institutional Revolutionary Party (PRI) took the reins Oct. 3. His predecessor was from the National Action Party (PAN).
A week earlier, Santander Serfin brought to market a routine Ps100 million (US$9 million) deal backed by federal participation revenues for the municipality of Aguascalientes. Rated triple-A on the national scale by Moody's and S&P, the transaction priced at 85 basis points over the actual or interpolated rated of 91-day Cetes (see ASR, 11/24, p.17). Pricing was Nov. 27.
Last week, Santander was jointly roadshowing with Banorte Casa de Bolsa a transaction for housing finance company Hipotecaria Nacional, according to sources. That deal should close by year-end. Another transaction by Santander, for Walter Torre, has been shelved. Apparently, the Brazilian-based company is mulling over the potential sale of the asset that would be securitized. (see ASR, 9/8, p.20).