Some remarkable things took place in Latin America's cross-border market in 2006: Auto loans from the region debuted, Argentina returned with onshore assets, and Jamaica, considered part of the region, minted its first deal backed by diversified payment rights (DPRs). But, at least in the public market, the hefty volumes once fueled by Brazilian originators remained a memory.
The expansive liquidity and unsecured options that have kept a number of formerly tried-and-true originators away from the market worked to the advantage of greenhorns and transactions with ratings that were atypically low for the structured realm. While not captured in ASR's securitization table, a few innovative infrastructure deals from Peru and the Dominican Republic made it through with double-B and single-B ratings.
"That sub-investment-grade deals were placed was a comment on the state of the market and its liquidity," said Sam Fox, senior director at Fitch Ratings.
The Argentine province of Neuquen took advantage of the open door to lower-rated transactions and in October issued a deal with a B-' grade from Standard & Poor's. While the deal was the first cross-border bond backed by onshore assets from the country since the 2002 crisis, it failed to pioneer a trend. The country's originators are either staying overwhelmingly local or taking other avenues to funding.
Elsewhere in the cross-border market, National Commercial Bank of Jamaica issued it's, and the country's, first DPR transaction in March. The seven-year deal totaled $100 million and featured a coupon step-up of 50 points, triggered if either Fitch or Moody's Investors Service dunked the cusp investment-grade deal into high yield territory.
The other big news from last year came from Mexican units of Navistar. They issued a cross-border deal backed by auto loans and leases, the first of its kind from the region, sources said (ASR, 1/8/06). Arranger Merrill Lynch bought the transaction, which was denominated in pesos.
While no longer shoveling the volumes of yesterday into the cross-border market, Brazilian originators stayed alive in future flows. HSBC Brasil became the second foreign bank in Brazil to collateralize DPRs, and old stalwarts Banco Itau and Unibanco amended and restated outstanding deals.
"It made sense for originators to keep the programs going in their refinanced form," said Emil Arca, a partner at Dewey Ballantine. "Existing programs that are up and running are always easier to tap."
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