Titularizadora Colombiana priced Latin America's first nonperforming loan (NPL) deal June 10. The US$33 million-equivalent senior tranche of a five-year piece priced at a real rate of 4.7%, while the identically sized senior tranche of a seven-year piece priced at a real rate of 5.39%. "As a first-ever deal of this kind, we think the results are quite good," said Alberto Gutierrez, the president of Titularizadora.

The securitizer aims to do a follow-up NPL transaction in August with banks other than Banco Conavi and Banco AV Villas, which provided the pool for the present deal. The bid-to-offer ratio hit 1.8x and buyers were largely institutional investors. Fitch Ratings affiliate Duff & Phelps and stand-alone agency BRC Investor Service rated the senior chunks triple-A on the national scale.

The securitization enabled AV Villas to cut down the nonperforming portion of its mortgage portfolio to 9% from 24%, Gutierrez said, adding that Conavi probably whittled down its NPL ratio by a similar degree.

The International Finance Corp. provided a partial guaranty on the senior pieces for up to 5%. "This transaction will be a benchmark operation that can be replicated in other countries," said IFC Vice President Nina Shapiro in a written statement. Gutierrez said that the IFC's technical assistance in structuring the deal was invaluable.

Like the regular MBS transactions that Titularizadora has issued, the NPL deal enjoyed tax-exempt status. This sweetener for mortgage deals will be scrapped for all transactions issued in 2005 and thereafter.

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