By November of last year, it appeared that Mexico would be a nonentity in the cross-border market for all of 2006. Domestic investors’ unquenchable thirst for securitization was deterring originators from going abroad and the promise of the first cross-border RMBS was fading as originator Metrofinanciera delayed a deal over M&A matters.
Then came Navistar. The Mexican unit of the truck loan and lease provider closed a two-tranche, peso-denominated transaction via Merrill Lynch. While the deal wasn’t sold into the market – Merrill’s New York operation was reportedly the sole buyer – it is registered in the U.S. and could be sold to investors here at any time. That is ultimately Merrill’s goal, according to sources close to the deal.
More significantly, the transaction is the debut cross-border securitization of vehicle loans out of Latin America, according to a few sources. It also appeared to score the highest ratings from Fitch Ratings, Moody’s Investors Service and Standard & Poor’s – A’, A2′ and A’ respectively – for a deal backed by onshore assets from the region. Those ratings went to an A piece, worth Ps1.26 billion ($116 million). The only other tranche is a B piece for Ps237 million and rated BBB-‘, Baa3’, and BBB-‘ by Fitch, Moody’s, and S&P, respectively. The A notes have a yield of 8.44%, and the B notes 9.27%. The final maturity for both is 15 years.
Kirkland & Ellis provided cross-border legal counsel for the originator, while Dewey Ballantine advised the arranger/initial purchaser.
Arrendadora Financiera Navistar is servicing the leases, while sister company Servicios Financieros Navistar is servicing the loans. Credit enhancement includes a 5% overcollateralization in the form of equity and a 15% subordination of class B notes, excess spread, and a reserve account.
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