With no sign that generous volumes and compressed yields are easing up in Mexico's domestic market, institutional investors seem to have a nearly boundless appetite for structured product. And now the market's little guys are joining the feast.
A good 20% of a bulging deal from the Mexican state of Veracruz landed in the hands of retail investors, according to Pablo Pena, head of investment banking at Vector, which was a joint-placement agent on the deal with Banorte. Sized at 1.38 billion inflation-indexed units (UDIs) ($468 million), the 30-year final transaction priced at a real yield of 5.32%. Pena added that the retail investors didn't appear to have much difficulty understanding the transaction, which was backed by vehicle taxes.
Fitch Ratings and Standard & Poor's rated the transaction triple-A on their respective national scales. The transaction was initially sized at closer to the UDI equivalent of Ps3.6 billion ($328 million) out of a total program of Ps6.3 billion. The fact that foreign investors - which have made a dent in domestic RMBS - are barred from purchasing paper from states and municipalities meant that the arrangers had to market the deal exclusively to domestic buysiders. Local financial consultancy Corporativo en Finanzas structured the deal.
Fellow sub-sovereign the Federal District, basically encompassing Mexico City, also tapped the market. The issuer returned with a deal backed by federal co-participation revenue, which are payments the federal government parcels out to states and municipalities. Led by IXE, the 10-year Ps1.4 billion transaction priced at 29 basis points over 28-day TIIE. Fitch and Moody's de Mexico gave the deal triple-A ratings on their respective national scales. The transaction came a few basis points inside the District's last transaction using the same collateral, placed two years ago.
On the faded cross-border front of Mexican structured finance, two local units of Navistar took their deals directly abroad. The market chatter was that the New York unit of Merrill Lynch had purchased the two-tranche, peso-denominated transaction with the aim of eventually distributing it to foreign investors.
The transaction consists of a Ps1.3 billion, five-year final A piece and a Ps237 million, five-year final B tranche. The coupon on the deals were 8.44% and 9.27%, respectively, according to an S&P press release, but it was unclear whether they priced at par. The agency's rating on the A tranche was A' and on the B piece BBB-'.
The collateral is made up of truck leases and loans originated by Arrendadora Financiera Navistar and Servicios Financieros Navistar, both based in Mexico. The transaction signals a cross-border debut for the Mexican operations of Navistar, but the company is familiar with the local securitization scene, having collateralized truck and bus loans in a Ps516 million, three-year final deal placed two years ago.
Up ahead in the domestic market, the city of Aguascalientes is readying a deal backed by payroll taxes. Led by Value, the issue is timed for the second week of December, according to a source close to the deal. The deal is currently sized at Ps1.4 billion. Crecimiento Programado structured the transaction in what is apparently the shop's first public securitization.
Aguascalientes has securitized federal participation revenue in the domestic market.
Finally, Mexican housing finance company Metrofinanciera is still in talks with investors regarding the fate of a $210 million cross-border transaction backed by bridge loans for construction, according to a source familiar with the process (ASR, 11/6/06). The deal's structure is looking shaky and the company recently approached investors to discuss whether it should repurchase the paper or modify the structure.
Meanwhile, the company still plans to issue an RMBS being arranged by Deutsche Bank, the source said. The deal stalled when Metrofinanciera entered talks to purchase peer Credito y Casa. The two have yet to advance beyond a non-binding agreement.
Still, Credito y Casa plans to move ahead on a domestic RMBS, aiming to issue in December. "That's the intention of the company," said a source close to the deal, which is sized at 271 million UDIs. The transaction is structured as an RMBS that can be re-opened. IXE is the arranger.
(c) 2006 Asset Securitization Report and SourceMedia, Inc. All Rights Reserved.