Postponed by market turbulence, Latin America's first non-performing loan (NPL) deal is scheduled to price June 10, according to a source on the deal. Bogota-based Titularizadora Colombiana aims to issue the local currency equivalent of US$73 million, below the cap of roughly US$94 million. Following a steady drop in Colombian interest rates, volatility abroad and negative local news conspired to send the yield on local paper through the roof starting in mid-April. The return on the benchmark domestic treasury maturing in April 2012 gapped out from 11.9% on April 12 to 14.7% on May 11. Yields have zigzagged down since then and Titularizadora is betting that the calmer climate will hold.

Fitch Ratings affiliate Duff & Phelps and stand-alone agency BRC Investor Service have rated the NPL paper triple-A on the national scale. The top rating is underpinned by steep subordination and overcollateralization, and a partial guaranty from the International Finance Corp. (see ASR 5/24, p.20). The deal is made up of a five- and seven-year tranche. Inflation-indexed coupons of 6% and 6.25% have been affixed to each piece, respectively, which will price at either par or at a premium, the source said.

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