In an effort to secure AAA' national-scale ratings for an upcoming deal, Mexican brokerage IXE Casa de Bolsa has clinched a corporate guarantee from government-controlled agency Sociedad Hipotecaria Federal.

Backed with housing sector loans extended by Metrofinanciera, the deal is worth Ps500 million (US$49.4 million) and held a Aa2.mx' preliminary national scale rating from Moody's Investors Service before IXE won the guarantee.

Indications from both Moody's and Standard & Poor's are that top-tier ratings would likely follow with the guarantee.

"[The guarantee] would help the transaction to be distributed faster," said Brigitte Posch, senior analyst of Latin America structured finance at Moody's. "It would add more comfort to investors [since there's] another entity performing their own due diligence."

IXE expects to price the bond in the second week of October, Prieto said.

Established early this year, Sociedad Hipotecaria Federal's chief mandate is to stimulate housing construction by fostering primary and secondary credit markets linked to real estate.

Metrofinanciera is the country's seventh largest SOFOL, a term used for special-purpose financial companies that provide bridge loans for housing construction and low-income mortgages. What makes this transaction different from earlier SOFOL deals is that 15% of the collateral comes from loans for land acquisition. Another 15% is for infrastructure loans and 70% are bridge loans for construction, the traditional backing for SOFOL transactions. "In the last four or five years, it's been all bridge loans," Prieto said.

As a revolving facility, no new land-purchase loans will be included in the trust structure after the third year of bond, since those loans tend to have longer maturities than the construction loans. "Land acquisition loans can take two years to pay back, while bridge loans run for about nine months," Prieto said.

The Metrofinanciera deal will be priced off 182-day Cetes and make quarterly payments. Amortizations begin in the sixth year. The deal is half of a Ps1bn (US$98.8 million) structured bond program for Metrofinanciera.

Over the last several months, appetite for paper outside the government sector has grown by leaps and bounds. Early this year, Mexican regulators scrapped a variety of restrictions on pension fund investments in corporate bonds. It now allows Afores as the funds are known to keep all their assets in private sector bonds rated triple-A. "There's a good window right now," Prieto said. Pension funds assets are currently US$28 billion, with only 11% in non-treasury bonds. By some accounts, total assets will hit US$70 billion in 2006.

IXE is preparing a similar deal for Hipotecaria Credito y Casa. The size will also be Ps500 million (US$49.4 million) while pricing is slated for mid November.

Further down the road, IXE is planning to issue a deal backed with assets generated by FRISA Vivienda, a private company that develops, builds, markets and sells low-income housing. The bond will amount to Ps300 million (US$29.7 million) and have a seven-year maturity with a three-year grace. Regulators are now looking at the transaction, which has garnered a Aa1' rating from Moody's on the national scale. Fitch has yet to make its rating public. Prieto expects that deal to close at the end of October.

Moody's has assigned Baa2' national-scale and B1' local currency global-scale to FRISA, which has traditionally depended on state agencies INFONAVIT and FOVI to bankroll the take-out financing for newly built homes. While the company is well-placed to grow alongside Mexico's flourishing housing sector, it suffers from financial constraints, according to Moody's. Most of FRISA's accounts receivables are secured by construction loans owed to banks, SOFOLs, INFONAVIT and FOVI.

In June of last year, IXE brought a like-structured deal to market. Backed with assets from Consorcio Hogar, the brokerage structured and priced a seven-year Ps300 million (US$29.7 million) deal at 575 basis points over 182-day Cete treasuries. Moody's rated that deal Aa2.mx' on the national scale.

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