Mexico's financial markets appear to have fully recovered from a bout of political jitters occasioned by contentious June elections. Not only is the pipeline humming with transactions, but at least two of them have novel features.

One deal, originated by Arrendora Financiera Navistar (AFN) and Servicios Financieros Navistar (SFN), looks set to be the first cross-border securitization of vehicle leases and loans from the country. Led by Merrill Lynch, the deal totals $118 million in two tranches, both with a final legal maturity of 7.5 years. Standard & Poor's rated $100 million in A notes A' and $18.75 million in B notes BBB-'.

AFN will service the leases, while SFN will service the loans, according to a release from S&P. Both asset classes are linked to trucks. Credit enhancement includes a 5% overcollateralization in the form of equity and a 15% subordination of class B notes, excess spread, and a reserve account.

While this deal marks the first time the Mexican operations of Navistar are issuing abroad, the company securitized truck and bus loans domestically in a Ps516 million ($46.8 million), three-year deal placed in December 2004.

There has been buzz that Merrill has led private structured deals in the domestic arena of Mexican structured finance, but the shop hasn't arranged any public ABS or MBS at least since the peso market took off a few years ago, according to ASR data. An official at the bank's Mexico City office didn't return a call for comment as of press time.

Meanwhile, the state of Veracruz is coming to the domestic market with a hefty deal backed by vehicle taxes. The transaction, currently sized at Ps3.6 billion, is scheduled for this year, and will be part of a Ps6.3 billion program structured by Corporativo en Finanzas. Local brokerages Vector and Banorte are placing the first transaction, which will have a legal final maturity of 30 years and duration of 12.8 years. It might be denominated in inflation-indexed units (UDIs), fixed rate pesos or variable rate pesos, but will most likely be a combination, according to a source close to the deal.

The collateral behind the deal are federal taxes on vehicles that are now under the control of the state. The participants are shooting for a triple-A rating. If the assets underlying the deal fail to perform, the structure will tap into federal co-participation revenue flowing to Veracruz, the source said. Proceeds will initially go to prepay all of Veracruz's debt, which currently totals Ps3.3 billion. After all the debt has been taken out, the proceeds are pledged for infrastructure.

Elsewhere in Mexico, nonbank housing finance company Patrimonio is readying an RMBS for Ps1 billion. The deal will be structured so it can be repeatedly re-opened. Ambac is expected to provide a wrap and Citigroup unit Acciones y Valores is the placement agent.

Meanwhile, state mortgage originator Infonavit is scheduled to issue an RMBS for Ps455 million UDIs ($153 million) on Oct. 11. With a legal final of 22 years and an average life of five years, the deal is the third off a Ps6 billion program.

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

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