Upcoming presidential elections in Mexico were bound to inject a degree of volatility into the peso market, but turbulence is also blowing in from abroad. Foreign investors are re-evaluating a historically low risk premium for emerging markets and Mexico has been suffering a drop in asset values as a result. "Last week was pretty ugly," said a Mexico City-based investment banker.

On the bright side, domestic issuance of securitizations has yet to stall, with two deals closing last week, and others expected before July's ballot. On May 24, auto-lease originator Arrendadora Unifin settled a Ps200 million ($17.9 million), five-year final transaction at 95 basis points over 29-day TIIE. Standard & Poor's rated the deal mxAAA' on the national scale and the sole arranger was IXE. The deal marks the company's debut in ABS. More deals backed by the company's car leases are likely to follow, given that Unifin registered a Ps1 billion shelf with regulators.

Other Mexican leasing companies, such as Facileasing, IXE Arrendadora, and El Camino have issued commercial paper in the domestic market, but have not collateralized their leases. The Unifin transaction will probably pique their interest in doing so, said a source familiar with the sector.

Elsewhere in Mexico, housing finance company Credito y Casa (CyC) issued a mortgage-backed deal amounting to 147 million inflation-indexed units (UDIs) ($49 million). Citigroup unit Acciones y Valores was sole lead. With a final maturity of 27 years, the deal priced at a real rate of 5.74%. Fitch Ratings and S&P rated the transaction triple-A on their respective national scales. While pricing was in line with recent, long-term ABS of triple-A quality, a source close to the deal said volatility made the sale tougher. "We've seen it in spreads [overall]," he said.

What the CyC paper had in its favor was a partial guaranty from state agency Sociedad Hipotecaria Federal, for up to 9.6% of outstanding volume. Also, the transaction was the originator's first securitization of mortgages. Despite being the third largest mortgage originator in Mexico's private sector, CyC is a latecomer to the RMBS world, with a handful of its peers having made repeated issues in that market before CyC showed up. The originator had assets of Ps19.3 billion as of March.

The transaction was the first off a program capped at Ps4 billion. CyC is also working with IXE on an RMBS that could be reopened repeatedly. That kind of structure, which has yet to be seen in Mexico, would signal an effort to create more liquidity for individual issues. CyC belongs to a group of nonbank housing finance companies known as Sofols.

This week, IXE is expected to bring to market a Ps500 million RMBS from Sofol Metrofinanciera. Meanwhile, further on the horizon is a deal for Sofol Fincasa, via IXE and Deutsche Bank Securities. Details on the deal were vague at press time, but one source said the structure could be similar with the upcoming CyC deal, with the potential for multiple reopenings built in.

Also, state-owned mortgage originator Infonavit has an RMBS slated for June 7, according to a prospectus on the Web site of the Mexican Securities Exchange. The projected size is 381 million UDIs and the maturity is fixed at 22 years. The lead is Acciones y Valores. Infonavit's last issue was a 22-year legal final RMBS for 326 million UDIs. Also handled by Acciones y Valores, that deal priced at 5.8%.

(c) 2006 Asset Securitization Report and SourceMedia, Inc. All Rights Reserved.

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