Moody's outlook for Latin America structured finance is stable
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Moody's outlook for Latin America structured finance is stable

Global Credit Research - 30 Jan 2012

New York, January 30, 2012 -- The credit quality of new and outstanding structured transactions in the Latin American markets in 2012 will generally be stable, although weaker for new deals in Argentina and to a limited extent Brazil, says Moody's Investors Service in its annual outlook report.

"In Argentina, new transactions are going to be weaker than existing transactions," says Martín Fernández Romero, a Moody's Vice President and Senior Analyst. "Weakness in the new transactions will be due to growing competition among lenders in the consumer loan market, which will result in a weakening of lenders' standards. In addition, delinquencies will rise because of high inflation and deterioration in real salaries."

At the same time, the credit quality of existing transactions will be stable because of the robust credit enhancement levels that have built up in the last few years, especially in deals with turbo sequential-payment structures that trap available excess spread, says Moody's.

The performance of new transactions in Brazil will range from neutral to negative but never positive.

"New regulations are going to result in banks significantly cutting the size of the equity tranches in their ABS and issuing new or larger mezzanine classes," says Johann Grieneisen, a Moody's Vice President and Senior Analyst. "The credit profiles of the senior tranches won't be different from the past but the mezzanine tranches are going to be riskier, and investors are going to demand higher returns to compensate. "

In contrast, the credit quality of existing transactions in Brazil will be stable, even as the benign credit cycle starts to soften. Delinquencies will rise for all asset classes but remain within Moody's rating parameters.

Finally, in Mexico, the credit quality of new securitizations will be strong, and government-related issuers INFONAVIT and FOVISSSTE will continue to dominate RMBS issuance, while the credit quality of existing securitizations other than non-bank Sofol RMBS will also remain strong.

"We're going to see ongoing hurdles for Sofol RMBS backed by mortgages to low-income borrowers," says Karen Ramallo, an Assistant Vice President and Analyst. "For the next year or two, servicers will have to work on improving the efficiency of their foreclosure proceedings and real estate-owned property sales if they're going to minimize recovery lags and maximize recoveries. Without any positive developments in this area, we will have to consider further stressing the recovery lag and sensitivity of loss assumptions in our rating analyses."

Also in 2012, Moody's says the first cross-border covered bonds may come to market in Mexico, where regulators are working on special regulations to allow the issuance of covered bonds. The legal framework for covered bonds is already in place in other smaller Latin American jurisdictions.

The report, " Latin America Securitization: 2012 Outlook," and all of Moody's 2012 structured finance outlooks, are available at www.moodys.com/2012sfoutlooks.

***

NOTE TO JOURNALISTS ONLY: For more information, please call one of our global press information hotlines: New York +1-212-553-0376, London +44-20-7772-5456, Tokyo +813-5408-4110, Hong Kong +852-3758-1350, Sydney +61-2-9270-8141, Mexico City 001-888-779-5833, São Paulo 0800-891-2518, or Buenos Aires 0800-666-3506. You can also email us at mediarelations@moodys.com or visit our web site at www.moodys.com.

Martin Fernandez Romero
Vice President - Senior Analyst
Structured Finance Group
Moody's Latin America, Calificadora de Riesgo
Cerrito 1186, 11th fl
Buenos Aires C1010AAX
Argentina
JOURNALISTS: (800) 666 -3506
SUBSCRIBERS: (5411) 3752 2000

Maria Muller
Senior Vice President
Structured Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's outlook for Latin America structured finance is stable
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© 2012 Moody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved.


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