While global markets reel from credit compression, Mexican spreads have edged out. But that has not deterred originators from entering the market with new asset classes. Case in point: GMAC Mexicana is in the pipeline with a first-time deal backed by cash flows from loans to affiliated dealers.
Due to close Sept. 26, the transaction is split into three tranches. The A notes amount to Ps1.64 billion ($154 million) and have a four-year legal maturity. The unrated B notes are worth Ps160 million, and the unrated C notes equal Ps200 million. Both also mature in four years. Expected maturity for most tranches is two years.
Moody's de Mexico and Standard & Poor's rate the transaction 'Aaa.mx' and 'mxAAA', respectively. Moody's also gave the deal a global local currency rating of 'Baa1'. Scotia Inverlat is the arranger.
The transaction is the first off a Ps10 billion shelf. "We would hope to do further deals beyond this one," said Greg Brinks, director of international securitization at GMAC Financial Services.
The collateral consists of accounts receivables linked to financings made through and serviced by GMAC off the platform "Plan Piso." Under "Plan Piso," GMAC makes a loan to car dealers to purchase vehicles, most of which are new and manufactured by General Motors. When the financed cars are sold, the payment flows back to GMAC.
The A notes have a subordination of 8% from the B tranche and 10% from the C tranche. Also providing a cushion is an initial reserve account for 2%, which climbs to 2.25% during the ramp-up period. A source close to the transaction said the deal should be appealing to investors in part for the early amortization events, which include a drop of the three-month payment rate to below 30%. Several bankruptcy or liquidation events at GM or GMAC would also trigger early amortization.
The underlying collateral is fairly well diversified geographically, according to Moody's. The structure features a concentration cap of 7% of the pool balance for each Mexican state, with the exception of the most populous regions: the Federal District, basically Mexico City, and the State of Mexico, which surrounds the District. At closing, these geographic areas accounted for 16.2% and 11.2% of the pool, respectively.
As of July 31, GMAC Mexicana's receivables portfolio was valued at roughly Ps5.8 billion, with Ps4.8 billion of that eligible for the bond program.
The company's and, by extension, the deal's fortunes are naturally tied to the performance of the Mexican economy. Core inflation in the country was running at 5.22% as of August, while GDP growth was 2.8% in the second quarter, year-on-year.
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