WASHINGTON, D.C., June 10, 2004
— The International Finance Corporation, the private sector arm of the World Bank Group, has signed an agreement to provide a credit enhancement facility to Titularizadora Colombiana, in support to the first securitization of non-performing assets in Latin America.
The financing was accomplished today through the issuance of US$67 million equivalent of senior mortgage backed securities (MBS) by Titularizadora Colombiana, Colombia's secondary mortgage market company which specializes in supporting the country's residential mortgage market through securitization and other activities. The MBS issue was backed by a pool of non-performing mortgage loans of two Colombia banks, Banco Conavi S.A. and Banco AvVillas S.A.
This transaction is expected to greatly accelerate the pace of resolution of non-performing loans in Colombia's banking sector and to provide liquidity to the participating banks. The issuance consists of two tranches of senior MBS of 5 years and 7 years respectively, a mezzanine tranche, and a junior tranche. IFC's credit enhancement facility is in the form of a local currency partial guarantee on the senior MBS. The IFC Facility, together with the credit enhancement provided by the mezzanine tranche and the junior tranche, enables the senior MBS to achieve a AAA rating based on Colombia local scale by both Duff & Phelps de Colombia S.A.and BRC Investor Services (Colombia). The credit enhancement facility offered by IFC is part of a broader strategy to help develop domestic capital markets and to expand the local currency financing options available to borrowers in emerging markets.
Nina Shapiro, Vice President, Finance and Treasurer, IFC said, “This securitization is emblematic of IFC's extensive and growing structured finance efforts to develop the mortgage, banking and capital markets in emerging markets. This transaction is pivotal for the development of the Colombian capital markets and will be a benchmark operation that can be replicated in other countries. We are pleased to help Titularizadora to introduce this new instrument to the market.”
"This ground-breaking project is an example of IFC's continuing support for the housing sector in Colombia. ” said Jyrki Koskelo, IFC's Director for Global Financial Markets, “The participating banks are expected to use the funding provided by the MBS issue to make additional housing loans in the Country. This makes home ownership more affordable, with spillover effects in many sectors of the economy."
Alberto Gutierrez, CEO of Titularizadora Colombiana, said, "We are pleased to be working with IFC on this innovative transaction. In addition to providing credit enhancement necessary to support the MBS issue, IFC has been instrumental in assisting Titularizadora Colombiana to conceptualize, structure and place the transaction. We look forward to continuing to work with IFC to bring new instruments to Colombia's capital market."
The mission of IFC (
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, helps clients improve social and environmental sustainability, and provides technical assistance and advice to governments and businesses. From its founding in 1956 through FY03, IFC has committed more than $37 billion of its own funds and arranged $22 billion in syndications for 2,990 companies in 140 developing countries. IFC's worldwide committed portfolio as of FY03 was $16.8 billion for its own account and $6.6 billion held for participants in loan syndications.
