Washington D.C., May 2, 2002—The International
Finance Corporation, the private sector arm of the World Bank Group, has
made a US$2.2 million investment in a local currency credit enhancement
facility to support mortgage backed securities (MBS) issued today through
Titularizadora Colombiana, Colombia’s first secondary mortgage market
company specializing in supporting the country’s residential mortgage
market through securitization and other activities.
This is the first MBS issue by Titularizadora Colombiana and is expected
to significantly accelerate the development of state-of-the-art, transparent,
and efficient housing finance services in Colombia. Today’s transaction
is groundbreaking in a number of aspects. Perhaps the most noteworthy
is the aggregation of mortgage loan collateral from three different mortgage
originators. The transaction is also expected to establish the blueprint
for further MBS issues in the country and will be critical in establishing
a high-quality, active and liquid market in fixed income securities.
Bernard Pasquier, IFC’s Director of the Latin American and Caribbean Department,
said: “This securitization is emblematic of IFC’s extensive and growing
housing finance and structured finance efforts to develop the mortgage,
banking and capital markets in emerging market countries. It is also
an effective and efficient way of connecting those institutional investors
who have long-term horizons with retail home mortgage borrowers in search
of long-term funding. This results in improvements in the affordability
of homeownership, with spillover effects to many other sectors of the economy”
Titularizadora Colombiana was only recently incorporated by IFC and a broad
coalition of firms active in Colombia’s financial sector. Its formation
follows the extensive restructuring of the mortgage business in Colombia,
as mandated by the new, modern Mortgage Framework Law recently enacted
by the Colombian legislature.
The issue consists of a senior class of bonds, in three tranches of varying
maturities, and a subordinated class of bonds. The senior class and
the subordinated class were rated “AAA” and “A” in local scale, respectively,
by Duff & Phelps de Colombia S.A. The total issue size is about
UVR3.8 billion, or $212 million. (UVR is an abbreviation for Unidad
de Valor Real, a monetary measurement which links the Colombian Peso to
changes in domestic inflation). IFC’s credit enhancement facility
is in the form of a local currency partial guarantee of the senior bonds.
The issue is expected to be well received by Colombian institutional investors
in an auction that will take place today.
Pamela Lamoreaux, head of IFC´s Housing Financing Group said: “This
transaction is pivotal for the development of the Colombian capital market
and it will be a benchmark operation for housing finance in other emerging
markets.”
IFC’s mission (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, and provides
technical assistance and advice to governments and businesses. From
its founding in 1956 through the close of the last fiscal year, IFC has
committed more than $31 billion of its own funds and arranged $20 billion
in syndications for 2,636 companies in 140 developing countries. Its
committed portfolio was $14.3 billion.