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Global Credit Research - 25 Oct 2010
ARS 280,000,000 in Debt Securities Affected
Buenos Aires, October 25, 2010 -- Moody's Latin America (Moody's) has assigned a rating of A2.ar
(sf) (Argentine National Scale) and of B3 (sf) (Global Scale, Local
Currency) to the VRD (securities) of Fideicomiso Financiero Programa Federal
Plurianual de Construcción de Viviendas - Provincia del
Chaco -- Serie I (the trust) issued by Instituto Provincial de Desarrollo
Urbano y Vivienda de la Provincia del Chaco (IPDUV Chaco), acting
as seller to the transaction. The VRD will be an obligation of
The debt securities will bear a floating interest rate (BADLAR Public)
plus 200 basis points. Interest and principal will be paid on a
quarterly basis, the 10th business day of January, April,
July and October, beginning on October 12, 2012. Accrued
interest from closing date to June 30, 2012 will be capitalized
on a quarterly basis. The legal final of the transaction is July
Instituto Provincial de Desarrollo Urbano y Vivienda de la Provincia del
Chaco (IPDUV Chaco), an autarchic entity of Province of Chaco,
assigned without recourse to the trust the collections derived from loans
to purchase low income houses, existing and to be built, in
the Province of Chaco, Argentina (IPDUV loans). Issuance
proceeds will be used to build 3,500 low-income houses in
the Province of Chaco. The Province of Chaco is rated A3.ar
(National Scale Rating) and B3 (Global Scale, Local Currency).
The transaction also benefits from a guaranty trust, which will
receive the transfers from the National Housing Fund (FONAVI -
Fondo Nacional de la Vivienda) corresponding to IPDUV Chaco. According
to National Law 24,464 and Provincial Law 4,368, IPDUV
Chaco is entitled to receive 4.6% of FONAVI collections.
This cash flow can be used as a secondary source of repayment in case
collections on the IPDUV loans are not sufficient to cover debt service.
Moody's did not provide significant credit to the primary cashflow
of the transaction; therefore the ratings are mainly based on the
FONAVI cashflows flowing through the guaranty trust.
The assignment of the FONAVI cash flow to the guaranty trust will be formalized
through public deed. In addition, the trustee will notify
the assignment to: (i) the National Ministry of Economy and Public
Finances, (ii) the National Ministry of Federal Planning,
Public Investment and Services, and (iii) Banco Hipotecario.
The FONAVI cashflow will be deposited automatically into the trust account
of the guaranty trust, and will remain in that account for 24 hours,
to be then transferred to IPDUV Chaco, unless instructed otherwise
by the trustee. The FONAVI cashflow will be available to pay debt
service, if the collections on the IPDUV loans are insufficient.
Moody's considered the risk that the IPDUV Chaco (or the Province
of Chaco) may attempt to interfere with the assignment of the FONAVI cash
flow to the guaranty trust. Moody's notes that there are
negative precedents in Argentina in transactions involving pledges of
another federal transfer, federal coparticipation taxes.
In these cases, certain provinces have successfully claimed in court
that the pledge of federal coparticipation taxes should not be respected
in times of economic emergency emergency of the province assigning the
flows. However, according to Moody's there are no similar
negative precedents in transactions backed by pledged FONAVI flows.
Unlike federal coparticipation taxes, funds from FONAVI are earmarked
and can only be used for social housing. Therefore, it is
less likely that the province could successfully claim in court that the
pledge of FONAVI funds should not be respected and that the funds be used
for general purposes during a scenario of economic distress. The
documents of the transaction indicate that in case of interference with
the FONAVI flows or the IPDUV loans , investors will have a claim
against the IPDUV and/or the Province.
Moody's believes that the likelihood that the province would attempt
to interfere with the assignment of FONAVI funds is correlated with the
credit risk of the Province of Chaco, which is rated A3.ar
(National Scale Rating) and B3 (Global Scale, Local Currency).
Therefore, if the rating of the Province is downgraded, the
rating of the VRD will likely be downgraded.
FONAVI is funded primarily by a percentage (33.18%) of the
collection on the fuel taxes. A modification of the regulatory
framework of FONAVI or a failure of the Argentine National Government
to transfer these funds to the Province of Chaco could affect the FONAVI
flows, which are critical for the repayment of the VRD.
Moody's analyzed the cash flow coverage levels considering both
the flows from IPDUV loans and from FONAVI.
Moody's developed a cash flow model that takes into account the
most relevant features of the transaction's assets and liabilities.
Monte Carlo simulations were run, which determine the expected loss
for the rated securities.
In assigning the rating to this transaction, Moody's assumed
a certain haircut for the expected cashflow coming from the IPDUV loans,
based on triangular distributions. For existing houses, Moody's
assumed a haircut with a minimum of 30%, most likely of 65%
and maximum of 100%. For new houses financed by this issuance,
Moody's assumed a haircut with a minimum of 50%, most
likely of 75% and maximum of 100%. Finally,
for other future housing programs , Moody's assumed a haircut
with a minimum of 80%, most likely of 90% and maximum
Also, Moody's assumed an Inverse Gaussian distribution for
the interest rate with a mean of 10.65% and delta of 7.01%.
These assumptions were derived from the historical performance of the
collateral and the reference interest rate. Moody's notes
that the interest rate on the VRD is variable based on the Badlar rate,
without a cap or a floor.
Finally, Moody's assumed an initial value for FONAVI's
annual collections of ARS 70 million. To forecast future performance,
the annual growth rate was modeled using a triangular distribution with
a minimum -5% annual increase, a most likely of 0%
and a maximum of 5%.
After running the Monte Carlo simulations, the expected loss of
the rated securities was consistent with a B3 (sf) rating.
The main uncertainties in this transaction are the collection levels of
the IPDUV loans, and also the volatility of the reference interest
This debt issuance by Fideicomiso Financiero Programa Federal Plurianual
de Construcción de Viviendas - Provincia del Chaco --
Serie I is the first issuance that Moody's has rated in this sector.
Moody's did not receive or take into account a third party due diligence
report on the underlying assets or financial instruments in this transaction.
Information sources used to prepare the credit rating are the following:
parties involved in the ratings and public information.
Moody's considers the quality of the information available on the issuer
or obligation satisfactory for the purposes of assigning a credit rating.
MOODY'S adopts all necessary measures so that the information it uses
in assigning a credit rating is of sufficient quality and from sources
MOODY'S considers to be reliable including, when appropriate,
independent third-party sources. However, MOODY'S
is not an auditor and cannot in every instance independently verify or
validate information received in the rating process.
Please see ratings tab on the issuer/entity page on Moodys.com
for the last rating action and the rating history.
The date on which some Credit Ratings were first released goes back to
a time before Moody's Investors Service's Credit Ratings were fully digitized
and accurate data may not be available. Consequently, Moody's
Investors Service provides a date that it believes is the most reliable
and accurate based on the information that is available to it.
Please see the ratings disclosure page on our website www.moodys.com
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Please see the Credit Policy page on Moodys.com for the methodologies
used in determining ratings, further information on the meaning
of each rating category and the definition of default and recovery.
Martin Fernandez Romero
Vice President - Senior Analyst
Structured Finance Group
Senior Vice President
Structured Finance Group
Moody's Investors Service
Moody's Latin America, Calificadora de Riesgo
Moody's Rates Fideicomiso Financiero Programa Federal Plurianual de Construcción de Viviendas - Provincia del Chaco -- Serie I
Cerrito 1186, 11th fl
Buenos Aires C1010AAX
No Related Data.
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