While global volatility has contaminated Mexico's domestic markets, it hasn't stopped originators from issuing paper over the last couple of weeks. But the word is that presidential elections set for July 2 will deter issuers from coming to market over the next two weeks and for about a week following the vote. The pipeline, though, still looks healthy.
On June 15, state originator Infonavit priced the senior piece of an RMBS for 273 million inflation-indexed units (UDIs) ($88 million) to yield 6.25%. The legal final is 22 years and the ratings are Aaa.mx' and mxAAA' from Moody's de Mexico and Standard & Poor's, respectively. Citigroup unit Acciones y Valores led the transaction.
About 25% of the senior chunk went to company treasuries, a group of investors that hadn't made much noise before, according to a source close to the deal. Foreign investors, which have snapped up some local RMBS, didn't make an appearance.
The transaction had a 24% credit enhancement in the form of subordination. Infonavit's mortgage loans are denominated in a multiple of the minimum wage, which is reset annually. At March 31, the underlying pool consisted of 9,891 loans, with a weighted average original loan-to-value (LTV) of 89% and a weighted average debt-to-income of 23.5%. The current LTV is 82.8%.
Elsewhere in Mexico, Chihuahua state securitized excess flows from an outstanding deal backed by toll road revenue. This marked the third time the state tapped these flows, which have been higher than anticipated, according to a source close to the deal. With a single rating of AA(mex)' from Fitch Ratings, the Ps1.6 billion ($141 million), eight-year final deal priced at 250 basis points over the highest of either Mexican treasury Cetes or the benchmark TIIE of up to six months. Value was the placement agent, while Corporativo en Finanzas structured the deal.
That was 45 basis points tighter than the Ps1.7 billion issued in two placements during 2004, which can be at least partly explained by the shorter life. The current transaction is a re-opening of the first two, which had a 10-year maturity. The total volume of deals backed by excess flows is now Ps3.3 billion, as the original two transactions only start to amortize in February 2013. These transactions skim off the surplus flows from two deals issued in 2002, amounting to Ps2.5 billion.
Chihuaha's program securitizes tolls from five highways directly owned by the state and four others owned by the federal government but operated by Chihuahua under a concession scheme. The nine roads span a total of 509.5 kilometers.
Also pricing recently in Mexico was an RMBS by Su Casita, one of leading originators in the country. The deal, split into two tranches, closed on June 9 via lead Credit Suisse and co-manager Inversora Bursatil.
An A tranche for 259 million UDIs priced at a real 6.1%. That chunk was rated triple-A on the national scales of Fitch, Moody's and S&P. A B piece for 30 million UDIs, meanwhile, priced at 7.85%, with ratings of A+(mex)' from Fitch and mxA' from S&P. The legal final was 29 years for both pieces. Pricing on the A piece came to 150 basis points over the government ten-year UDI-bono, which was the tightest for a Su Casita deal, according to a source. This suggested that market volatility had yet to damage the better-known names in local structured finance.
The average LTV on the underlying pool is 79.7%, and remaining average weighted life is 22.7 years. The mortgages are spread through 22 states. A disproportionately large share was originated in three states: the Federal District, which accounted for 19%; Mexico state, making up 17%; and Quintana Roo state, representing 13%.
Up ahead is a joint deal for GMAC Financiera and GMAC Hipotecaria. The former is securitizing credits to housing finance providers, while the latter is securitizing its own bridge loans for construction, according to a source close to the transaction. An A tranche will be sized at about Ps747 million, with a five-year final maturity. A B tranche will reach around Ps53 million, with a 5.5-year final maturity. The lead is HSBC.
Aside from the GMAC transaction, there are deals in the pipeline from real estate companies Comercial America, Fincasa, Su Casita and Patrimonio (for last two, see cover story).
It's unlikely that more than one or two deals will squeeze through before Mexican go to the ballot. One source familiar with GMAC said the transaction could come before the election, unless the distractions offered by a tight political race - not to mention financial turbulence from higher global interest rates - get out of hand. According to the last few polls, leftist candidate Andres Manuel Lopez Obrador has pulled slightly ahead of conservative rival Felipe Calderon, who had been the frontrunner. And apart from politics and gyrating global markets, local players have yet another reason to put issuance off until July: the World Cup.
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