Mexico's housing finance provider Metrofinanciera tweaked the coverage of a partial credit guaranty from government agency Sociedad Hipotecaria Federal between its most recent RMBS and a prior one. The outcome of the change, which ultimately lowered the percentage coverage needed to achieve a top-tier rating, bodes well for its staying put.
"This gave us a good result," said Jorge Perez Maldonado, deputy head of treasury at Metrofinanciera. He added that the guaranty performs better with the most recent application.
In that RMBS, sized at 138.8 inflation-indexed units (UDIs) or about Ps500 million ($47 million), the guaranty covered up to 11% of the volume and could be tapped to restore the subordination level if it dips below the 1.5% floor. This would be achieved by using the guaranty to amortize the senior notes. In the RMBS that directly preceded this one, of the same size, the SHF guaranty covered interest and principal payments but not a drop in subordination. Therefore, should past-loans grow out of hand in the underlying pool, the guaranty could not be drawn on until the deal's maturity. This would explain why that guaranty had to cover a higher 26% of the deal, according to Guillermo Valle, an associate of the emerging market team at Standard & Poor's. The change "is simply a different way to execute the guaranty," said Valle, who pointed that the previous deal enjoyed enough credit to withstand a non-performing portfolio.
Moody's Investors Service and S&P rated both transactions triple-A on the national scale.
The most recent deal, with a legal maturity of 28 years, priced last Tuesday at an inflation-indexed 5.91%, settling two days later. The lead manager was IXE. Pricing was on August 16, while settlement was August 18. While a precise breakdown of investor type was unavailable at press time, foreign investors bid on the transaction, according to a source close to the deal. "These are hedge funds looking for higher rates," he said. The book was five times oversubscribed.
As of April 20, the collateralized pool consists of 1,510 UDI-denominated residential mortgages taken out by borrowers in lower income strata. The weighted average LTV of the pool currently is about 81.6%, according to a Moody's report. Fellow originator Su Casita acts as back-up servicer.
This deal is the third tap of a Ps5 billion RMBS program that Metrofinanciera set up last December, bringing the total draw down to Ps1.5 billion.
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