Washington, DC, August 3, 2005
–- Rio Bravo Securitizadora (RBSec), a leading real estate securitization company in Brazil which is a
subsidiary of Rio Bravo Serviços Financeiros SA,
announced today that it will receive equity investments from the International Finance Corporation, the private sector arm of the World Bank Group, and Residential Funding Corporation (GMAC-RFC). As a result of their investments, IFC and GMAC-RFC will own approximately 40 percent of RBSec’s share capital. The equity investments are expected to close in days.
GMAC-RFC will also introduce new products in association with RBSec to provide funding to the Brazilian residential real estate market, while IFC is exploring further ways to support RBSec's business activities involving the warehousing and eventual securitization of residential real estate receivables.
According to Nicholas Reade, CEO of RBSec, the investments by IFC and GMAC-RFC represent not only an endorsement of the firm’s business activities as well as a useful injection of equity, but will also allow RBSec to benefit from the considerable experience of these two institutions in a variety of different markets.
Luis Cláudio Garcia de Souza, Chairman of RBSec’s Board of Directors, said, “As a result of the launch of new business lines together with GMAC-RFC and IFC, our company will be able to widen its product range and introduce innovative risk-mitigation techniques to the Brazilian housing finance market.”
Atul Mehta, IFC’s Director for Latin American and the Caribbean, said, “RBSec is making home ownership more accessible to the country’s middle class and helping address Brazil’s current housing deficit by increasing the availability and lowering the cost of housing finance.”
Fernando Cruz, who is responsible for GMAC-RFC’s Latin America Business Development, said, “The recent shift in RBSec’s strategy, where the company will now be sharing risks with real estate developers and taking risk exposure on real estate assets, is a perfect fit for GMAC-RFC’s business model.”
Alessandro Vedrossi, GMAC-RFC’s Director of Latin America Business Development added, “GMAC-RFC expects that the introduction of new products by RBSec will foster further development of the Brazilian residential real estate market, and increase the availability of funding products with a better risk-return balance.”
RBSec’s main business focus will be on structuring and issuing residential Certificados de Recebíveis Imobiliários (CRIs), which are effectively the Brazilian-equivalent of mortgage-backed securities. This is a segment where RBSec sees the most growth potential, and has already undertaken 12 transactions. In 2004, CRI transactions raised nearly R$403 million for commercial and residential real estate-related issuers in Brazil, and CRI issuance volume so far in 2005 is already above that figure.
Demand for, as well as supply of, CRIs have increased in the last several years, and each trend is likely to accelerate. This is due to recent regulatory and legal reforms implemented in Brazil—which have laid the basis for well-functioning housing finance markets—pent-up demand for housing, the country’s increasingly benign interest rate environment, and heightened demand by investors for new types of long-duration financial assets.
RBSec is one of the leading real estate securitization companies in Brazil. Its principal business activities include: (i) the origination of residential and commercial real estate receivables from financial institutions and developers, (ii) their securitization as CRIs and subsequent placement with investors, and (iii) acting as a master servicer for CRI transactions.
With a market share of approximately 20 percent, RBSec is the second largest player in Brazil’s real estate asset securitization market, and since its inception the firm has issued approximately R$388 million of commercial as well as residential CRI transactions. So far in 2005, RBSec has been responsible for 11 of the 28 commercial and residential CRI transactions undertaken in Brazil.
Initially, the company focused mostly on commercial real estate securitizations (for example, “build-to-suit” transactions) with clients such as Cargill, IBM, Unilever, and HSBC. More recently, RBSec has strengthened its presence in the residential real estate market. Examples of the latter, in addition to its everyday residential CRI securitization activities, include the following. It recently signed with Caixa Economica Federal – Brazil’s state-owned national savings bank – in its capacity as agent for the Fundo de Garantia de Tempo de Serviço – a provident savings system in Brazil that provides funding to eligible financial institutions for on-lending to low-income households, and which is the largest source of housing loans in the country – an agreement for the latter to acquire up to R$40 million of CRIs. Also, RBSec´s affiliated company, RB DTVM, has raised R$50 million for an FIDC (in other words, receivables fund) dedicated to the acquisition of residential real estate receivables, where RBSec is responsible for asset origination on behalf of the fund. Finally, last month RBSec issued the first AAA-rated residential mortgage-backed security in Brazil, with real estate receivables of Brascan Imobiliária Incorporações S.A. underlying the transaction.
GMAC-RFC, a wholly owned subsidiary of Residential Capital Corporation, is a leading private issuer of mortgage-backed securities and the No. 1 warehouse lender in the United States. The company leverages its strengths in securitization, lending, and investment to offer a broad portfolio of innovative capital solutions to businesses in a variety of markets. The company is headquartered in Minneapolis and operates in the United States, Canada, Mexico, Brazil, United Kingdom, and continental Europe.
The mission of IFC 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 FY04, IFC has committed more than US$44 billion of its own funds and arranged US$23 billion in syndications for 3,143 companies in 140 developing countries. IFC’s worldwide committed portfolio as of FY04 was US$17.9 billion for its own account and US$5.5 billion held for participants in loan syndications.
