Chilean brokerage Larrain Vial made a tough sale on June 19, placing a securitization of future tuition flows rated A-' on the national scale. Universidad de Concepcion is the originator. Structured by American International Group (AIG) company Interamericana Securitizadora, the deal went primarily to mutual funds and banks, said a source familiar with the transaction. As expected, pension funds made a poor showing. That was in character, given that they normally eschew structured paper that many notches below the AA' rung. The originator still came out a big winner, with its debt costs easing dramatically and maturity profile pushed out. Sized at 2 million inflation-indexed units (UF) (US$48 million), the deal's proceeds went to refinance bank debt. Unconfirmed talk held that the creditor banks snapped up a good portion of the transaction. On a weighted average, the paper yielded 6.64%. A 1.3 million UF tranche (US$31 million) priced at 6.5%, while a 700,000 UF tranche (US$17 million) yielded 6.9%. The former went to institutional investors, whereas the latter ended up with small investors and financial intermediaries, a source said.

Standard & Poor's affiliate Feller Rate and Moody's Investors Service unit Humphreys rated the deal. The legal final maturity was

10 years, while the duration was seven years (for more details see ASR 5/19, p.21).

The transaction marks the second tuition deal in Latin America. There is chatter in Brazil of a similar deal being done in the domestic private market and involving an upscale high school.

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