Mexico's market sprang back to life in the third quarter, as issuers and investors alike reconciled themselves to steeper interest rates, churning out more floaters priced against the shortest-term benchmarks. "Investment funds want paper that is revised more frequently and that's what they got," said a Mexico City-based banker.

Seven originators swept away the paralysis that had struck issuance in the second quarter. The housing sector came on strongest, with real estate originators Su Casita, GMAC Hipotecaria, Fincasa, and Hipotecaria Nacional coming to market. Aside from a deal jointly originated by GMAC and Su Casita, the most popular collateral remained bridge loans for construction. Sized at the local currency equivalent of $47 million, the GMAC/Su Casita transaction marked the close of a two-issue program.

Juxtaposed against this comeback was an event that could make securitization superfluous for Nacional, the largest private-sector originator in the housing sector. A Mexican subsidiary of Spain's Banco Bilbao Vizcaya Argentaria announced that it would purchase Nacional for $375 million. Players are concerned that the acquisition might dampen activity by providing the originator with funding that is cheap enough to preclude the need for securitization. The news has also sparked talk of more acquisitions of Mexican real estate financial companies by highly rated foreign banks. The stock of Nacional's peers that trade on the Mexican Securities Exchange shot up after the news broke.

With assets of Ps29 billion ($2.6 billion) as of June, Nacional has been a regular issuer of construction-loan backed deals. Further down the road, Nacional could decide to securitize as an effective way to match the maturities of assets and liabilities.

Elsewhere in Mexico, the auto-loan asset class emerged as the next big thing in the third quarter. Financieros Navistar, a unit of U.S.-based Navistar International Corporation, is coming to market with a Ps500 million deal backed by truck and bus loans. The arranger is Scotiabank Inverlat and timing is for this month.

Copyright 2004 Thomson Media Inc. All Rights Reserved.

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