06/18/2010

Finacity Maps Dual Transactions

(SEE CORRECTION BELOW) Finacity is working on two term securitizations for clients in Mexico.

Both deals are expected to hit the market in the next few months. The first, of undisclosed size, would be backed by trade receivables. The second would be backed by "microloans" to individual borrowers and is set to total $300 million.

Finacity's core business is structuring and arranging trade-receivables securitizations for clients outside the U.S., both in the term and commercial-paper conduit markets. The microloan issue would be its first in the asset class.

Microloans are high-interest-rate credits extended to poor business owners in developing nations, typically ranging from a few hundred to a few thousand dollars. Kiva, a company that matches lenders with borrowers, claims the credits have a repayment rate of 98%.

While issuers have completed a few microfinance-loan securitizations in the past, starting with a 2004 deal from Geneva-based BlueOrchard, the asset class has never been particularly active. Finacity's offering would be backed by 2 million loans with an average size of $150. S&P is reviewing the transaction, but has yet to indicate whether it will grant a rating that would make it financially viable.

The planned deals come from a pipeline that Finacity chief executive Adrian Katz described as the company's largest ever, with 12 issues in various stages of development. The Stamford, Conn., operation expects its overall volume of term and conduit issues for 2010 to top last year's total of $15 billion - with about $8 billion done so far.

While most of Finacity's transactions have involved conduits, it is working to build its term business and has been urging clients to consider such deals as a lower-cost alternative to unsecured debt and a longer-term option than commercial-paper deals.

The shop's term-issuer clients over the past year have included Mexican glass maker Vitro and container company Grupo Zapata. On the conduit side, it's close to completing a trade-receivables deal for a company in Germany.

Finacity plans to add origination specialists to its staff this year. It's also looking for a trader to buy and sell trade receivables that clients don't want to securitize.

CORRECTION (7/2/10): This article misstated the size of a securitization Finacity is planning. The deal, backed by Mexican microfinance loans, would total about $20 million. It would have a revolving asset pool with an average balance of $25 million to $30 million, and could finance up to $300 million of loans each year.

Back Print