Grinding toward a milestone in Mexico's mortgage sector, Su Casita appears to have hit a small detour.
The originator was understood to be ready to float the private sector's first straight peso RMBS last week when state agency Sociedad Hipotecaria Federal stepped in and requested changes to the structure, according to a market source. This forced Su Casita to delay the issue. The changes, said to be minor, represent SHF's push to standardize the mortgage market - an effort featuring methods that have not endeared the agency to some mortgage players, according to sources. An official at the Sociedad had not returned a call for comment as of press time.
While declining to comment on the nature of the delay, Su Casita's deputy head of corporate finance Mark Zaltzman discussed the novelty of the transaction.
"It's a challenge, and we think, a groundbreaking deal," he said.
The deal will probably be in the ballpark of Ps750 million and be structured to carry triple-A ratings on the respective national scales of Moody's Investors Service, Standard & Poor's and Fitch Ratings. The lead arranger is Credit Suisse, which has a working relationship with Su Casita.
Private sector Mexican originators known as Sofols have so far issued paper only denominated in UDIs, an inflation index, to mirror the denomination of the underlying collateral. State-owned originator Infonavit stands alone in issuing pesos RMBS, having closed a deal in March 2004. But even that issuer has since opted for UDI deals. Also, it set the legal final of its peso deal to a tame 12 years, while Su Casita is going for a bold 27 to 28 years.
"With long tenors, [investors] are scared to buy fixed peso securities," Zaltzman said. "Regardless of interest rates, UDI-denominated paper protects against inflation."
While a nearly 30-year tenor for fixed rate RMBS is old hat in the U.S., risk that long without built-in inflation protection is a tough sell in Mexico.
But exposure to inflation might be exactly what investors with a bullish long-term bent want.
"The road show went extremely well," Zaltzman said.
He expected interest from foreign investors, which have already grabbed chunks of UDI-denominated RMBS.
The collateral of the peso RMBS will be peso mortgages, which Su Casita has been increasing in both absolute and relative terms. That segment accounted for about 25% of the 20,000 loans that the company churned out in 2005, up from 15% in 2004. Demand is coming from middle-income borrowers. Su Casita's assets totaled Ps23.5 billion in June 2005, up 24% from Ps18.9 billion a year earlier.
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