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IFC-enhanced NPL surfaces in Colombia

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Titularizadora Colombiana is readying what is being touted as Latin America’s first non-performing loan (NPL) deal. Holding a 5% guaranty from the International Finance Corp., the US$94 million-equivalent deal is heavily over-enhanced, according to Fitch Ratings Senior Director Gregory Kabance. “It’s needed in a transaction like that,” he said, speaking at the 3rd Annual Latin American Securitization Summit.

Even with a recovery ratio of 70%, the domestic transaction has an overcollateralization of no less than 60% and a subordination of at least 50% for two senior tranches. The originators on the transaction are Banco AV Villas and Banco Conavi. Fitch affiliate

Duff & Phelps and stand-alone agency BCR Ratings have the senior pieces at triple-A on the national scale. One of the tranches has a five-year life; the other is seven years.

The deal comes after new reforms were passed in Colombia, which reduce the complexity, length and costs of the foreclosure process, Kabance said.

Past-due loans accounted for 20.0% of Colombian mortgages in January 2004, edging down from 22.1% in January 2003, according to the Titularizadora Web site.

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