With three domestic MBS transactions in the oven and the expectation of three new entrants to the securitization market this year, Chile may be bouncing back from its economic slump, bolstered by revised securitization laws and improving market conditions.
According to an affiliate of Standard & Poor's, La Construcion, a Chilean construction company, is expected to come to market with a $60 million MBS transaction by next month and Banco Santiago is structuring the deal.
Banco Santander, the largest bank in Chile, has said it intends to prepare four or five deals this year, and already has two MBS transactions in the making. In the past, Banco Santander has structured two deals in which Banco de Desarrollo was the originator. Sources say the two will play the same roles in a new MBS transaction expected to close in the first half of this year, totaling between $15 million and $20 million.
Banco Santander will structure another MBS transaction (house leasing) also between $15 million and $20 million. Three small companies, Las Americas, Hebner y Muoz, and Con Creces will be the originators.
In addition to these deals, there are three new securitization players on the block expecting to come to market this year. Banco Edwars is already working on an MBS transaction with Belta. Banco de Credito Inversiones (BCI) is also looking to become an established participant in Chile's MBS market. Lastly, IM Trust, originally a stockbroker company, has developed a securitization sector and is aspiring to add some creativity to the market with non-MBS transactions, since mortgage securitizations are currently the most typical in the Chilean market.
According to Moody's Investors Service, as a result of the new laws and the changing economy, Chile's domestic asset-backed market increased by nearly 318% in 2000, totaling U.S. $133 million in domestic issuance. According to sources, prior to 2000 there were some deals in Chile, however they did not have the "real face" of a securitization transaction.
Like many other Latin American countries last year, Chile added more flexibility to the securitization laws, allowing deals backed by new asset types to come to market. New asset types, including credit card receivables, non-performing bank loans, forestry assets, auto-loans and future flow transactions, are now permitted in the country.
According to sources, Chile is in the process of learning about the laws and what is involved in completing securitizations and therefore the process can take quite awhile to complete. However, with three mortgage deals already in the market amounting to almost $90 million, it seems to be picking up relatively quickly.
"Chileans were used to a very high growth rate, and by that I mean about 7% during the 90s in general, which is quite high by Latin American standards," said Marro Leos, a sovereign analyst at Moody's. Chile began to see signs of a slowdown in the economy in 1998, when the GDP dropped to 3.4% from 7.4% a year earlier. According to Leos, the latest numbers show that Chile is growing at about 4% or 5%.
"Before 2000, Chile was in a recession and there wasn't much going on in the market, but now because the economy is getting better, you are going to see it reflected in securitization," said Brigitte Posch, an analyst at Moody's. "If the economy is better, you have more volume and you can securitize more."