Business Services Industry

Thriving Real Estate and Mortgage Markets to Fuel Mexico's Structured Finance Growth in 2004

Business Wire, Jan 14, 2004

Business Editors

NEW YORK--(BUSINESS WIRE)--Jan. 14, 2004

In 2004, overall growth in Mexico's structured finance market will be driven chiefly by the country's thriving mortgage and real estate markets, which are expected to grow by at least 30%. In addition, the deepening sophistication of investors will aid in the market's continuing diversification into new assets, supported by an improving credit environment that will enhance the stability of ratings across all sectors, according to credit analysts at Standard & Poor's Ratings Services.

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Originators and issuers of existing assets have been keen to structure new types of transactions, such as those with partial credit guarantees or backed by consumer loans, real estate leases, and now mortgages. "The first Mexica n RMBS deal successfully debuted in December 2003, pricing at a record low of 5.00% fixed interest rate. This favorable pricing suggests a wider acceptance of, and demand for, structured finance debt by domestic investors," said credit analyst Juan Pablo De Mollein, an associate director in Standard & Poor's Latin America Structured Finance Ratings group in New York. Recent sales of other structured deals confirm this trend. Two municipal structured deals sold at the end of the fourth quarter of 2003 were oversubscribed and priced favorably.

Construction companies and mortgage banks (Sofoles) have made great efforts to address Mexico's estimated six-million-unit housing deficit, and the need for additional funds is becoming more pressing. To overcome this need, issuers will continue the securitization of construction bridge loans. In addition, Mexico's federal mortgage lending institution (Sociedad Hipotecaria Federal) will take significant steps to further develop the primary and secondary mortgage markets in Mexico in 2004 and beyond. Multilateral entities and global market participants will also enter the domestic market in 2004, helping to ensure that 2004 will be another record year.

"In terms of volume, number of deals, and asset classes, 2003 was a record year," said Mr. De Mollein. In 2002, there was a total of 14 structured deals in Mexico, for a total amount of US$788 million, while in 2003, there were 34 structured deals, for a total amount of US$2.4 billion. This represents a 204% growth in volume and a 143% growth in number of deals. Aside from Mexico's first RMBS deal, Mexico also saw its first real estate commercial tenant lease-backed transaction, its first ABS consumer-backed deal, and its first ABS trade receivables deal. Moreover, explained Mr. De Mollein, macroeconomic and market conditions were favorable, helped by persistent low local interest rates, high oil prices, a stable political scenario, and the expected recovery of the U.S. and Mexican economy. "These factors will continue to strengthen Mexico's domestic structured issuances in 2004."

The domestic market will continue to dominate Mexico's overall structured success in 2004 as it did in 2003, when 90% of total structured finance issuances were placed domestically. In contrast, domestic issuances represented only 43% of total issuances in 2002. "Mexico's structured finance growth during the past year has been possible because of the favorable environment created by the local financial and economic indicators, and key regulatory and institutional changes that occurred during the past three years," said Mr. De Mollein. "This environment has helped create a successful market for securitization that will foster greater sophistication among investors in the next year."

Standard & Poor's, a division of The McGraw-Hill Companies, provides widely recognized financial data, analytical research and investment, and credit opinions to the global capital markets. With more than 5,000 employees located in 20 countries, Standard & Poor's is an integral part of the global financial infrastructure. Additional information is available at www.standardandpoors.com.

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Business Services Industry

Thriving Real Estate and Mortgage Markets to Fuel Mexico's Structured Finance Growth in 2004

Business Wire, Jan 14, 2004

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