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14 Mar 2011
ARS 13,700,000 in Debt Securities Affected
Buenos Aires, March 14, 2011 -- 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 II (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 trust.
This is the second series issued under this program. Interest and
principal payments will be made on a prorata basis with the first series
issued under this program. When assigning the rating to Series
I under this program, Moody's considered the debt service
coverage ratios calculated at the entire program's permitted issuance
amount (ARS 360 million).
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 April 15, 2013. Accrued
interest from closing date until the first payment date will be capitalized
on a quarterly basis. The legal final of the transaction will take
place 15 years after closing.
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 701 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 cash flow of
the transaction; therefore the ratings are mainly based on the FONAVI
cash flows 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 Undersecretariat of Housing and Urban Development,
and (iii) Banco Hipotecario.
The FONAVI cash flow 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 cash flow 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 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 directly.
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
In assigning the rating to this transaction, Moody's assumed a certain
haircut for the expected cash flow 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 of 100%.
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 Public 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
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 Investors Service considers the quality of 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
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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
Moody's Latin America, Calificadora de Riesgo
JOURNALISTS: (800) 666 -3506
SUBSCRIBERS: (5411) 4816-2332
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 II in Argentina
Cerrito 1186, 11th fl
Buenos Aires C1010AAX
JOURNALISTS: (800) 666 -3506
SUBSCRIBERS: (5411) 4816-2332
No Related Data.
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