Banco Hipotecario del Uruguay (BHU) is pushing ahead with the country's first securitization. The state-owned bank is shopping for an arranger for a $100 million cross-border mortgage-backed deal, which is scheduled for next year.

Following the approval of a securitization law in 1999 (ASRI 2/28/2000), state-owned BHU emerged as the natural candidate for Uruguay's first MBS deal. "We enjoy a prominent positions as the country's largest mortgage originator," explained Cesar Cendoya, deputy manager at BHU. "So the government decided that we should pioneer the securitization efforts. The idea is that if we succeed other players will follow."

BHU will have to overcome some obstacles before it becomes a regular issuer. The main hurdle is Uruguay's securitization law, which establishes that only mortgages issued for the purchase of homes or for refurbishing are susceptible to securitization.

"Construction loans are actually the largest part of our business, and yet we can't securitize them," explained Cendoya. "It is a political decision that will hopefully change soon."

Unlike most issuers, BHU will not start by issuing smaller local deals before it tests the international markets. "We are able to get financing from the local markets through straight debt issuance, so we see no need to do local securitizations," said Cendoya. "For us, MBS is a good financial instrument that will enable us to access foreign investors and garner funds that we can't get from our small local market."

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