It's never been more stylish to securitize your assets in Brazil. Local clothing label Zoomp is ready to thread its way into the capital market through a receivable investment fund (FIDC), the vehicle of choice for non-real estate issuers. Known more for youthful low slung jeans - which paired with a denim bikini on the website, www.zoomp.com.br, makes for an eye-searing combination - the company is expected to launch a R$60 million ($26 million), three-year final fund by the end of the month. Banco Votorantim is the fund manager, while Banco Itau is the custodian and payment agent. Standard & Poor's has assigned a brAAAf' national-scale rating to the senior tranche, which has a 20% subordination. The projected yield is 109% of the benchmark CDI rate.
The transaction is a standard trade receivables FIDC, with a revolving pool comprised of two asset types. One kind of receivable is generated by multi-label stores that purchase Zoomp's clothing; the other is from credit card purchases made at the company's own stores. Since most of the clothes are sold through the multi-label route, those receivables are projected to account for the bulk of flows, with credit cards representing as low as 20%. Still, they could rise in proportion, according to a source close to the deal.
Customers at Zoomp stores that buy on credit use Redecard, owned by Mastercard, Visa, and American Express. The strength of those brands is understood to bolster the deal.
The deal is on hold for now, while Itau runs tests that are essential to effectively oversee the collateral, according to a source close to the deal. The issuer's main objectives for this transaction are to gain exposure for the first time to the capital markets and to lengthen its debt profile. Like other small-to-medium companies in Brazil, Zoomp finances its operations mainly by selling discounted receivables to banks.
A popular denim brand in Brazil, Zoomp sells many other kinds of sportswear as well. The company also produces a label called Zapping.
Elsewhere in Brazil, Banco BMC has just launched the first auto loans FIDC originated by a bank. The first issue off the program includes a 30-month, R$100 million senior tranche, with a 15.5% subordination. Oliveira Trust is the fund manager, Itau is the master servicer, and Banco Bradesco is the collection agent. Law firm Motta, Fernandes Rocha advised the originator and Oliveira. Moody's America Latina rated the senior shares Aaa.br' on the national scale and Baa3' on the local currency, global scale. Fitch Ratings gives Banco BMC a rating of BBB-(bra)' on the national scale.
Apart from the enhancement, the deal has a projected available excess spread of 25% on an annualized basis, with 4% set aside for the deal to access at any given time. BMC's funding program of auto loan FIDCs totals R$500 million, according to a source on the transaction. He added that so far about R$30 million has been sold of the initial tranche.
BMC grants loans for a wide range of vehicles, including smaller cars, trucks, motorcycles and station wagons.
Meanwhile, Santander Investment kicked off the roadshow last week for a lease transaction involving oil giant Petroleos Brasileiros. The deal, which is not using the FIDC vehicle, is a R$200 million, 10-year securitization of lease payments owed by Petrobras under a "built-to-suit" agreement (ASR, 9/12/2005). The arranging bank was initially heard as underwriting the offering in its entirety; in fact, while it is committed to a full underwriting, Santander aims to sell all the paper to retail and private banking clients, according to a source close to the deal.
Since real estate deals have enjoyed an income tax exemption since January, Santander has detected a potentially ravenous appetite among individuals. The bank has already met with the private banking divisions in Sao Paulo of peers like Itau, Bradesco and UBS, the source said. Further meetings are to be held in Rio de Janeiro, Belo Horizonte, and Porto Alegre. Some will be open directly to retail investors that may not earn enough to fit the private banking mold. Still, the minimum for a bond is R$300,000.
Santander is currently accepting orders, the source said. Distribution is slated for October.
Elsewhere, the Eccelera FIDC - the first principal protected securitization in Brazil's domestic market - is heard to be on roadshow (ASR 9/22/05). There is no set date for distribution, according to source close to the deal. The transaction has six months from its regulatory registration in early August to sell its shares.
In other FIDC news, water company Sabesp has awarded a mandate to Votorantim, Caixa Economica Federal, and Banco do Brasil to structure an FIDC, according to a Sao Paulo-based banker familiar with the issuer. State owned Caixa was a shoe-in because it has traditionally been a prodigious buyer of Sabesp's trade receivables, the banker said, adding that Caixa was even hired before the RFP went out to assess the feasibility of a deal. Initially heard at R$500 million, the FIDC could end up closer to R$250 million, he added. Collateral would probably be comprised of contracts to individuals and small companies. Launch isn't expected before 2006.
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