Mexico closed out the month of December with deals from four originators. Spreads were well out from earlier in the year, but these transactions at least made it through, and market investors bought in as well.

All told, the rough equivalent of $808 million in ABS and MBS was sold domestically last month - not a terrible tally for Mexico in today's climate.

The most novel transaction in the bunch was one that pooled 199 municipalities in the state of Veracruz. It was the first multi-originator deal from the muni sector, according to several sources.

The 28-year transaction was split into two tranches, one denominated in inflation-indexed units (UDIs) and the other in fixed pesos. The former tranche, worth 239 million UDIs ($74 million), priced at a real 7.45%. The fixed-peso tranche, totaling Ps213 million ($16 million) priced to yield 285 basis points over six-month TIIE.

The pooled collateral consisted primarily of car ownership fees and also included a nominal percentage of federal participation revenue from the federal government.

Local brokerage Value led the deal, with Banorte co-managing. Local financial consultancy Corporativo en Finanzas structured the transaction.

A good chunk of the deal was sold to pension funds, while Banorte purchased about 20% for its brokerage arm, said a source close to the deal. That paper will likely end up in the hands of retail investors. Under Mexican law, foreign investors aren't allowed to purchase sub-sovereign debt.

The transaction was rated 'AA-(mex)' by Fitch Ratings and 'AA+' by HR Ratings de Mexico. It appears that this is the first public structured deal that HR has rated since establishing itself in the country last July. The agency, affiliated with India's Credit Analysis and Research, indicates on its Web site that it will focus on the sub-sovereign sector in Mexico.

HR's Director Alberto Ramos said in a press release announcing the agency's debut that it sought to break the "oligopoly" of the big three ratings agencies. An official from the company didn't return a request for comment.

The car ownership fees collateralized in this deal were enacted in 1967 and have grown nearly every year since then. During the Tequila Crisis, however, there was a severe drop. The 33% plunge in fees was posted in 1995, the year after the Mexican currency's value cratered. From 2003-2007, they grew 6.8% a year on average.

Mortgage provider Infonavit also issued in December. The state-owned agency, better insulated from liquidity issues than many of its private-sector peers, priced a two-tranche, 22-year deal, with even halves worth 259 million UDIs each. One tranche went for 5.55%, while the other yielded 6.25%.

Pricing was more or less in line with an RMBS that Infonavit issued in October but remained more than 100 basis points higher than a deal closed in April.

Citigroup unit Acciones y Valores and Deutsche Bank were co-leads on the Infonavit deal. HSBC was a co-manager. All three major agencies rated the deal triple-A on their respective national scales.

Also in the mortgage sector, BBVA Bancomer came out with a Ps5.5 billion, 22-year RMBS. Rated triple-A on the national scales of Moody's de Mexico and Standard & Poor's, the deal priced at 9.91%. In a sign of the times, the transaction carried a partial guaranty from government agency Sociedad Hipotecaria Federal (SHF), which a few months ago announced a colossal package to support the housing sector in the country.

The BBVA deal came out about 105 basis points over a comparable deal from the originator in March.

Finally, government credit agency Fonacot placed a two-tranche Ps2 billion deal backed by consumer loans in December. Both had a tenor of three years, with an expected life of two years. Fitch and S&P alike rated the transaction triple-A on their respective national scales. One tranche, totaling Ps580 million, priced at 350 basis points over 28-day TIIE. The other piece, amounting to Ps1.4 billion, priced at 200 basis points over.

In February, a similar deal from Fonacot fetched three basis points over TIIE.

Local development bank Nacional Financiera extended a partial guarantee to the recent deal. Scotia Capital was the lead.

(c) 2009 Asset Securitization Report and SourceMedia, Inc. All Rights Reserved.

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