Mexican housing finance company Patrimonio has penciled in a Ps800 million ($74 million) ABS for pricing in mid June, its second bond backed by bridge loans for construction, infrastructure projects and property acquisition. Led by Multivalores, the transaction has a senior/sub structure, a choice that dovetails with the originator's ambition to finance these assets without overly depending on outside support, in particular the Sociedad Hipotecaria Federal. "We prefer to use this structure to reduce our dependence on the SHF," said Othon Paez, head of financial planning at Patrimonio. For years a major provider of funding for Mexico's housing finance companies, the SHF is now morphing into a bond guarantor.

Patrimonio is open to working with guarantors - and not only the SHF - in securitizing its mortgages when it debuts in that market, an event that sits hazily in the future. "We have nothing committed or official, but we're working on projects to eventually securitize mortgages," Paez said.

He added that to be eligible, mortgages would have to be denominated in inflation-indexed units (UDIs in their Spanish acronym), a feature of all the pools that have backed outstanding deals originated by Sofols, the term used for private finance companies like Patrimonio and peers Metrofinanciera, Su Casita and GMAC Hipotecaria. State agency Infonavit has proven the exception, having backed issuance with peso-denominated mortgages. Among its options in venturing into RMBS, Patrimonio would consider selling loans to GMAC Financiera into the latter's conduit (see related story, p. 18) or working with GMAC and other Sofols in other capacities. Just a few weeks ago, GMAC extended Patrimonio a Ps250-million revolving credit line to fund bridge loan origination, Paez said.

Currently on roadshow, the Multivalores-lead transaction is comprised of Ps672 million "Class I" notes, Ps96 million "Class II" notes, and Ps32 million in subordinated paper. The legal final maturity is roughly 5.5 years. Fitch Ratings and Standard & Poor's rate the Class I and II tranches triple-A and single-A on the national scale, respectively.

The collateral is comprised of loans to construction projects and housing developers. Given that eligible loans cannot exceed 24 months, the structure is revolving. Some 80% of the loans must have an interest rate of at least 2% wide of the yield of the Class I tranche of the securitized bond. Upon completion of the real estate project being financed, a government agency will generally fund the purchase, depositing payment directly into the trust for the collateralized loans.

The Sofol's initial securitized deal priced last October and had a senior chunk sized at Ps588 million and a subordinated tranche totaling Ps84 million. The deal signaled a first in the domestic paper market for both Patrimonio and sole lead Multivalores (see ASR 11/1/04). The originator has also been active in the plain vanilla market, having closed a five-month unsecured bond via Santander Serfin on May 13. The deal priced at 100 basis points over 28-day TIIE.

Patrimonio's assets totaled Ps6.78 billion in March 2005. The figure is a 27% increase from March 2004 and a leap of 127% from two years earlier, according to historical data on the website of the Sofol trade group, known by its acronym AMSFOL.

Residential mortgages account for 82% of assets, while bridge loans for construction make up the other 18%. Despite Patrimonio's torrid growth over the last few years, its most recent figures on return on assets and capital surpass the industry average, according to a report by S&P.

Fitch and S&P rate Patrimonio as a credit BBB+(mex)' and mxBBB', respectively. They also give the Sofol servicer ratings of AAFC2(mex)' and Superior to Average', respectively. Last month, S&P lifted its outlook on Patrimonio's credit rating to positive from stable. The company's progress in diversifying the geographic make-up of its asset base was one of the catalysts for the upward revision.

More issuance should come out of the housing sector in the second half of the year. "The balance sheet continues to grow and [Sofoles] will want to free some up," said Rene Ibarra, associate director at Fitch Ratings in Monterrey. "We expect to see more housing deals in the second half of the year."

(c) 2005 Asset Securitization Report and SourceMedia, Inc. All Rights Reserved.

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