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 Business News | May 2005 
U.S. Investors Look To Mexico Bond Landmark
 John Authers - Financial Times
U.S. investors should next month get their first chance to invest in bonds backed by loans in Mexico.
Metrofinanciera, the fifth largest of Mexico's specialist mortgage lenders known as sofoles for their initials in Spanish is offering US125 million in seven-year notes, backed by Mexican construction bridge loans.
The deal is complex and has required the involvement of several intermediaries. However, if it is successful it could be an important step in opening a new market for U.S.-based investment banks, and offer an important new source of financing for Mexico's fast-growing housing market.
A market for securitized mortgages has begun to grow in Mexico in the past two years, as the nation's markets continue their recovery from the so-called "Tequila Crisis" of 1994-95, with demand for the bonds coming mainly from private Mexican pension funds, known as Afores.
But the Afores, which were set up in 1997, remain relatively small, and Mexican housing executives believe it is necessary to secure financing from outside the country.
Total outstanding housing credit in Mexico has grown 15 per cent in each of the past four years. The government predicts it will continue to grow at this rate for the rest of the decade, as a demographic "bulge" of people in their early 20s seeks to buy their first house.
Sofoles used old-fashioned debt-collection methods, typically going door to door. This has helped achieve delinquency rates far below international averages.
However, complicated transactions were needed to gain the necessary investment-grade BBB+ rating from Standard & Poor's.
Among the most important points, Dresdner Switzerland has guaranteed a cross-currency and interest basis swap to enable Metrofinanciera to offer the bonds denominated in dollars.
The SHF, the government development bank charged with finding new sources of finance for the housing market, is also guaranteeing 10 per cent of the total transaction, solely to cover Dresdner against mark-tomarket risk. The SHF also provided a partial credit guarantee, worth 14.2 percent of the underlying portfolio.
Ambac Assurance of the United States is also guaranteeing timely payment of interest and principal.
Several other U.S. banks are also involved, with JPMorgan acting as the trustee, and Dresdner Kleinwort Wasserstein acting as placement agent.
Government-backed credit for the housing sector is expected to reach 120 billion pesos (US10.9 billion) this year. While likely to increase, this underlines the need to attract external financing.
A small domestic market has begun to develop the SHF backed three mortgage securitizations for sofoles last year, worth 2.7 billion pesos (US246 million), bringing the total issued by sofoles to 3.34 billion pesos (US305 million). Infonavit, the national social housing agency, issued bonds worth 1.96 billion pesos (US179 million) last year, and plans to go to the market for a further 1.5 billion pesos (US137 million) this year. |
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