Mexican domestic securitizations are returning, albeit slowly. With a Ps400 million (US$35 million) bond, housing developer Casas Beta shattered the issuance paralysis that had gripped the market for all of the second quarter. Placed July 8, the five-year deal priced at 270 basis points over the one-month TIIE benchmark via local brokerage IXE. Collateral is comprised of bridge loans for construction and land earmarked for housing projects (see ASR 6/7, p.22).

Interest rates that shot up in April have begun to steady and investors are less reticent to take on market risk. "They really have no choice, because their liquidity is becoming unmanageable," said one Mexico City-based banker, referring to the violent diversion last quarter in pension fund money toward virtually risk-free product such as time deposits and short-term peso treasuries.

As a result, other originators are expected to follow Casas Beta's lead this quarter. "There will be some more issuance this quarter," said another banker, who added that recent corporate issuance of American Express and FEMSA augurs well for more action overall. Still, activity is unlikely to match the first quarter in either volume (Ps7.1 billion or US$619 million) or number of issues (eight).

IFC gives boost to micro-lender

Meanwhile, the International Finance Corp. (IFC) is providing a partial guaranty on a deal from micro-lender Compartamos. Citigroup unit Acciones y Valores is leading the transaction. The originator has yet to determine the size of initial issuance of a program capped at Ps500 million (US$44 million), said a source close to the deal.

The IFC guaranty covers 34% of the transaction and is denominated in pesos as well. Thanks largely to the guaranty and a standby loan from the IFC equal to the size of the guaranty, Standard & Poor's has rated the paper mxAA' on the national scale, two notches above Compartamos' corporate grade of mxA+'. The IFC is rated triple-A. While Fitch Ratings has not previously rated the corporate, it will be rating the structure and simultaneously coming out with a corporate rating as well, sources said.

Compartamos is a private sector financial institution that lends to disadvantaged individuals with little access to formal sources of funding. Most of the borrowers are women who run neighborhood businesses such as vegetable stands or small clothing stores. Loans average a paltry Ps3,500 (US$305) balance,16-month term and rates of 4.5% to 5% a month.

Typically, the lender pools women together in groups of 15 to 20 before granting a loan. That not only creates some minimal economies of scale, but it also removes the need to execute a thorough due diligence of each borrower, since the individuals in the group act as guarantors for each other, according to a source familiar with the company.

The groups tend be self-selecting, as members know each other and usually keep out anyone with a shaky financial reputation. As a result, the company has an over 30-day delinquency rate of 0.7%.

To date, the company has primarily tapped development banks for funding, according to one source.

The IFC has been moving aggressively in the guarantor business in Latin American domestic markets. Last year, the multilateral helped guarantee a Ps96 million (US$8.4 million) transaction for the Mexican municipality of Tlalnepantla. It has also been active in Colombia and Chile.

Copyright 2004 Thomson Media Inc. All Rights Reserved.

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