Wednesday, 11 March 2009

LatinFinance Has Interesting Story on Brazilian, Peruvian Banks' DPR Sales This Year

Magazine LatinFinance's daily newsletter today moved an interesting story about booming sales of bonds backed by Diversified Payment Rights (which is nothing else than a securitisation of future flows) in Latin America in recent weeks. The newsletter says on today's edition that, for regional banks, it has become ''the obvious option´´ the ''securitisation of future flows, including remittances, exports, and foreign direct investment (FDI) flows, through issuing DPR bonds.´´

The step indicates a departure from common practice in recent years, when the world abounded in liquidity and issuers were able to place unsecured debt instead of guaranteed paper. It reflects that conditions for corporates are becoming much tougher by the day -- remember our recent postings on Cemex and Digicel. Potential issuers such as Colombia's Ecopetrol (which is considering the sale of $8.1 billion of debt in coming months and has embarked on a $3 billion refinery upgrading project alone) will face more investor scrutiny; companies like Petrobras will face tougher refinancing conditions; and companies like PDVSA will have access to credit closed (unless the Chinese want to break the market rules.)
LatinFinance says: ''The boundary between bonds and loans becomes blurred with MT100s, since they are typically privately placed with a small group of investors.´´

According to LatinFinance, Brazilian banks sold around $2.3 billion in DPRs alone, (also known as MT100s,) and ''several Peruvian banks including BCP, BBVA Continental, and Interbank also deployed the structure.´´ Among the banks that are considering tapping the markets through DPRs are Interbank (the fourth largest Peruvian bank) and Brazil's Banco Bradesco (which is a very active issuer in the DPR and private placement markets.) For those who know little about the structure, we recommend visiting a 2005 posting by Ambac in which the structure is explained with details. Here is the link.


  1. Interesting, thanks.

    The old style "mesa de dinero" has moved into the legit field. It's also a neat way to get those untraceable offshore dollars bak in the world of the legal...should go down well in Colombia :-)

  2. Probably yes -- but believe it or not, Colombians are now borrowing in their own money ... We could find out why ... heheh

    By the way, I loved your post about the cocaine ... I think in general we all tend to commit the same mistake (falling into maniqueísmo, condemning producers and traffic route countries like Vennie because of their filifiación política.) A bad mistake ... that we journos have to sort out.

    The blog, MM, es un acto de contrición (penitencia, purgatory if you like) for years of working for Bloomie -- which you often rightly point out as a very biased news vehicle.

    Cuidate amigo ...