Mexican low-income home-builder Consorcio Hogar S.A. is getting ready to launch its first ABS deal. The company expects to hit the market with approximately P200 million ($21.7 million) in bonds by May and Casa de Bolsa Ixe S.A. will be the arranger. "If this first deal is successful it will be just the beginning for us," explained Alberto Baz, Hogar's chief financial officer. "Eventually, we hope to raise P450 million in financing."

The transaction will not only be the first one for Consorcio Hogar, it will also be Mexico's first securitization of revenues from low-income housing projects. The projects are commissioned by the Instituto del Fondo Nacional de la Vivienda para los Trabajadores (Infonavit), a government sponsored housing program that provides subsidized mortgage loans to lower-income households (ASRI 1/17/00, p.3).

Despite the fact that both Moody's Investor Services and Standard & Poor's recently raised Mexico's foreign currency ratings to Baa3 and BB-plus respectively, Baz believes that securitization is the most effective way for Consorcio Hogar to lower its borrowing costs and create a standard for similar sales to raise capital.

"Despite the recent upgrades and the lower interest rates, a structured deal would enable us to surpass our corporate ratings," he explained.

If the transaction is successful, it could open up a whole new horizon for other Mexican house builders. "We know of several other companies who are interested in this type of structure," said a banker. "If Consorcio Hogar's deal works out we could expect many other issuers in the market."

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