Brazilian arranger Rio Bravo Investimentos has started building the book for a transport-related receivable investment fund (FIDC), with global money a major target. "We are pretty positive that the pricing on this deal is going to be attractive to foreign investors," said Marcos Lima, a structured finance analyst at Rio Bravo. Hedge funds and investment banks with branches in Brazil could be amenable to buying in, he added. The anticipated volume of senior shares totals R$150 million ($72 million).
The fund is scheduled to price in about a week. As a seven-year deal, its reception by foreign investors will likely send out a signal about the global appetite for longer-dated Brazilian risk. So far, foreign hedge funds have focused on shorter-dated deals.
The originator on the deal is Companhia Paulista de Trens, which runs Sao Paulo's commuter railroad. Having clinched the mandate in June of 2005, Rio Bravo has taken a good deal of time in executing the transaction. A few months ago, the arranger blamed the deal's complexity and the novelty of the asset class for the plodding pace of structuring. A further delay popped up when regulators changed some rules for FIDCs in December. "We had to restructure," Lima said.
Moody's Investors Service has rated the senior piece Aa3.br' on the national scale, and the subordinated chunk Ba2' on the local currency global scale. Expected to reach R$50 million, the subordinated piece is unrated. Banco Bradesco is the fund manager.
As a fund with a future flow component, under local regulations it must come with either a performance bond or an explicit waiver from Brazil's securities commission. CPTM has the waiver. The performance bond requirement is linked to the operational risk of future flow deals, but for the CPTM fund, the risk is low as a shutdown in service would seriously disrupt economic activity in the country's financial and business hub, Lima said.
The deal is collateralized by receivables from 21 stations, some of which offer transfers to Sao Paulo's far-reaching subway system. Everyday over 1.4 million commuters take CPTM's trains.
New fund with a military cut
Also from Brazil, originator Sabemi Seguradora has begun distributing shares in an FIDC backed by payroll deducted loans, according to a source close to the transaction. Banco Schahin is the lead arranger, and Gainvest do Brasil Asset Management is the co-arranger. The fund manager is Concordia.
Senior shares, for up to R$75 million, are rated brAAf' on the national scale by Standard & Poor'. The subordinated piece - 25% of the total volume - is unrated. The tenor is 43 months, and the yield pre-set at 110% of the benchmark CDI rate.
The company's main business line is insurance, but it also makes loans, chiefly targeting people in the military. To insure a degree of diversity by employer, the structure of the deal imposes a 35% volume cap on loans linked to each branch of the Brazilian armed forces: the Army, Navy, and Air Force.
Payroll-deducted loans are popular assets in Brazil's ABS market, and were the first to rope foreign investors into reais-denominated structured deals because of their familiar and moderate risk profile. But the rise of other asset classes started to eclipse these assets last year - they accounted for 12% of all domestic securitizations in 2006, from a cumulative 25% over the previous few years.
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