Latin Finance - April 2008 - 53

securitization structured finance Investor Appetite Holds its Own by Brigitte Posch, Managing Director and Head of Latin American Securitization Roberto Watanabe, Vice President of Latin American Securitization Chris Corcino, Associate of Latin American Securitization Emile Ernandez, Analyst of Latin American Securitization Deutsche Bank I nvestor appetite for Latin American securitizations in the first two months of 2008 has continued somewhat unabated, despite the global credit crisis. This trend is driven by investors’ understanding that the credit quality of Latin American securitized paper (especially those issued out of Brazil and Mexico, Latin America’s most active markets, as can be noted from the chart below) has not been affected to the same degree as RMBS transactions in the US during the recent market turmoil, primarily because of the more-conservative origination and underwriting criteria practiced by originators in the region. This, however, does not mean that there have not been some bumps on the road. Latin America 2007 Securitization Volumes per Country (Domestic Issuance only) Others (28%) Mexico (37%) Brazil (35%) Source: Moody’s Investors Service related claims. Defaulted tax receivables are owed by tax payers to the public entities at the sovereign and sub-sovereign levels. Offshore investors have driven demand for esoteric assets, and thus far in 2008 such demand has continued, although investors have demanded higher spreads and more stringent due diligence criteria, with an enhanced focus on credit quality and overall risk mitigants. Deutsche Bank has pioneered the securitization markets of esoteric assets in Brazil, especially precatórios, having acted as Lead Arranger in the Polo Precatório Federal FIDC deal, a BRL 85 million securitization which was the first in the country backed by a precatório. LatinFinance awarded the Polo Precatório deal with the 2007 Latin American Securitization Deal of the year. Investor demand for defaulted tax receivables has been robust, providing an incentive for several Brazilian subsovereign entities at the state and municipal level to consider the securitization of their portfolios of defaulted tax receivables as an alternative solution to raising additional funds to meet ongoing expenditures, as well as to improve overall tax collection performance. These sub-sovereign entities have several restrictions on debt issuance following the implementation of the Fiscal Responsibility Law in 2000, which introduced the adoption of rigid and stringent fiscal policies and expenditure containment. Public officials at these sub-sovereign entities have considered securitization of defaulted tax receivables as an alternative to such fiscal restrictions. According to market estimates, there are approximately $500 billion of defaulted tax receivables in Brazil. In the other corner of the Brazilian securitization market, Deutsche Bank expects a rebound in interest from investors in other asset types such as trade receivables, personal loans, and real estate expected for the second half of the year, as overall credit market conditions ameliorate the investor appetite for asset types, which have been a staple of the Brazilian securitization market for years. Brazil In Brazil, demand for securitized paper has continued, especially for esoteric assets like precatórios and non-performing assets such as defaulted tax receivables. Precatórios are courtmandated sentences where the Brazilian government is mandated, by the judicial system in a final and unappealable judicial order, to make payments from different types of claims including tax settlements, land disappropriation and other Mexico Although the global liquidity crisis has not affected Mexico anywhere near to the extent it has impacted the US markets, its presence has been felt nonetheless. Fundamentally, the Mexican RMBS market remains sound because of the following dynamics: the country remains exposed to a long-term housing deficit, which leads to large unmet demand from qualified borrowers; mortgage originators conduct full-documentation 2008 LATINFINANCE 53 guide
Latin Finance - April 2008

Table of Contents for the Digital Edition of Latin Finance - April 2008
