Washington D.C., May 2, 2002
—The International Finance Corporation, the private sector arm of the World Bank Group, has made a US$2.2 million investment in a local currency credit enhancement facility to support mortgage backed securities (MBS) issued today through Titularizadora Colombiana, Colombia’s first secondary mortgage market company specializing in supporting the country’s residential mortgage market through securitization and other activities.
This is the first MBS issue by Titularizadora Colombiana and is expected to significantly accelerate the development of state-of-the-art, transparent, and efficient housing finance services in Colombia. Today’s transaction is groundbreaking in a number of aspects. Perhaps the most noteworthy is the aggregation of mortgage loan collateral from three different mortgage originators. The transaction is also expected to establish the blueprint for further MBS issues in the country and will be critical in establishing a high-quality, active and liquid market in fixed income securities.
Bernard Pasquier, IFC’s Director of the Latin American and Caribbean Department, said: “This securitization is emblematic of IFC’s extensive and growing housing finance and structured finance efforts to develop the mortgage, banking and capital markets in emerging market countries. It is also an effective and efficient way of connecting those institutional investors who have long-term horizons with retail home mortgage borrowers in search of long-term funding. This results in improvements in the affordability of homeownership, with spillover effects to many other sectors of the economy”
Titularizadora Colombiana was only recently incorporated by IFC and a broad coalition of firms active in Colombia’s financial sector. Its formation follows the extensive restructuring of the mortgage business in Colombia, as mandated by the new, modern Mortgage Framework Law recently enacted by the Colombian legislature.
The issue consists of a senior class of bonds, in three tranches of varying maturities, and a subordinated class of bonds. The senior class and the subordinated class were rated “AAA” and “A” in local scale, respectively, by Duff & Phelps de Colombia S.A. The total issue size is about UVR3.8 billion, or $212 million. (UVR is an abbreviation for Unidad de Valor Real, a monetary measurement which links the Colombian Peso to changes in domestic inflation). IFC’s credit enhancement facility is in the form of a local currency partial guarantee of the senior bonds. The issue is expected to be well received by Colombian institutional investors in an auction that will take place today.
Pamela Lamoreaux, head of IFC´s Housing Financing Group said: “This transaction is pivotal for the development of the Colombian capital market and it will be a benchmark operation for housing finance in other emerging markets.”
IFC’s mission (
www.ifc.org
) is to promote sustainable private sector investment in developing countries, helping to reduce poverty and improve people's lives. IFC finances private sector investments in the developing world, mobilizes capital in the international financial markets, and provides technical assistance and advice to governments and businesses. From its founding in 1956 through the close of the last fiscal year, IFC has committed more than $31 billion of its own funds and arranged $20 billion in syndications for 2,636 companies in 140 developing countries. Its committed portfolio was $14.3 billion.
