Washington, D.C., June 29, 2006—The
International Finance Corporation, the private sector arm of the World
Bank Group, has arranged BRL50 million (approximately $22 million equivalent)
of five-year financing for Rio Bravo Securitizadora S.A. The transaction,
which is pending final approval from the securities regulator in Brazil,
will be IFC’s first debt funding targeted at the country’s housing finance
Under the deal, IFC would provide a
credit-linked guarantee to Banco ABN AMRO Real S.A., which would make local
currency funding available to support Rio Bravo Securitizadora’s operations.
The funding provided by Banco Real would be directly invested in
quotas of a fundo de investimento em direitos creditórios (FIDC), which
is the Brazilian equivalent of a bankruptcy-remote funding vehicle, or
trust, containing residential real estate receivables that are originated
by Rio Bravo Securitizadora.
In turn, Rio Bravo Securitizadora would
securitize the receivables in the form of certificados de recebíveis imobiliários
(CRIs), which are the Brazilian equivalent of mortgage-backed securities,
to be placed with domestic investors.
“We are very pleased to be working
with Banco Real to make additional funding available to support Rio Bravo’s
residential real estate origination, securitization, and placement activities,”
said Saran Kebet-Koulibaly, IFC’s associate director for Latin America
and manager for Brazil. “IFC’s financing aims to increase the pool of
funding for developers of much-needed housing for middle-income Brazilians
and to provide opportunities for local institutional investors to diversify
their portfolios into longer tenor, private sector debt instruments, such
as securities backed by residential real estate.”
Nicholas Reade, CEO of Rio Bravo Securitizadora,
said, “The IFC project will further demonstrate the viability of an alternative,
private sector channel of residential real estate finance. By complementing
relatively limited sources of funding for residential real estate construction
and home purchases, this transaction—and similar efforts in the future
—should help address Brazil’s housing
deficit and enhance the affordability of home buying for middle-income
In another milestone, this transaction
would involve IFC’s first credit-linked guarantee on behalf of an emerging-markets
borrowing client, where IFC provides a full guarantee on the client’s
local currency loan, as long as the country where the debtor is located
is current on its predetermined debt obligations.
Lee Meddin, IFC’s deputy treasurer,
said, "Through the issuance of sovereign-linked guarantees,
IFC is now able to offer a product that meets rather than exceeds
the needs of investors and lenders who do not require a guarantee rated
higher than that of their own sovereign. Investors and lenders benefit
by receiving a guarantee instrument with a higher yield than that offered
on other securities fully backed by IFC's international triple-A rating."
IFC’s housing finance strategy in Brazil
aims to increase market liquidity by supporting the business activities
of securitization companies, mobilizing funding from capital markets investors,
and helping standardize residential real estate origination and securitization
practices along international lines. Where feasible, IFC also works
with commercial banks on housing finance-related transactions.
For a variety of reasons, Brazil has
a potentially large market for housing finance, with significant opportunities
for securitization firms. There is an unmet demand for attractively priced
financing with reasonable tenors from middle- and lower-income households
as well as residential real estate developers. Another spur for growth
is an effective legal and regulatory framework for primary and secondary
market housing finance, which was established in the last 10 years but
is only now starting to be used fully by financial sector intermediaries.
Finally, macroeconomic stability and lower interest rates are increasingly
the norm in Brazil, which should make residential real estate-related asset
classes more attractive for investors than in the past, as well as home
buying more feasible for lower- and middle-income families.
About Rio Bravo Securitizadora
Rio Bravo Securitizadora is one of the
leading real estate securitization companies in Brazil. Its principal
business activities include originating residential and commercial real
estate receivables, subsequently securitizating them in CRI format and
placing them with investors, and acting as a master servicer for CRI transactions.
Rio Bravo Securitizadora’s largest shareholder is RB Crédito Companhia
de Securitização Imobiliária, which owns approximately 58 percent of the
company. Other investors include GMAC-RFC and IFC, which hold 20
percent and 19.9 percent stakes, respectively, as well as several individual
shareholders. Rio Bravo Securitizadora’s CRI origination volumes
grew over the period 2000-2005 from BRL11.7 million to BRL608.1 million
($284.2 million equivalent), in line with overall growth trends in the
CRI market. At present, the company has a market share of 16 percent
of total CRI issues in Brazil.
IFC in Brazil
During fiscal year 2005, Brazil received
the largest amount of IFC financing, in dollar value, among Latin American
countries. IFC invested $591million, including $190 million in syndications,
in sectors ranging from agribusiness and transportation to manufacturing
and the financial sector. IFC’s total portfolio in Brazil was $913
million at June 2005.
IFC's strategy for Brazil focuses on
enhancing clients' prospects for competitiveness and growth, improving
the country's social equity through voluntary actions by the private sector,
and continuing to promote sustainability. Since 1956, when Brazil
joined IFC, the Corporation has provided $7.45 billion, including syndications,
for 162 companies in the country.
The International Finance Corporation
is the private sector arm of the World Bank Group and is headquartered
in Washington, D.C. IFC coordinates its activities with the other
institutions of the World Bank Group but is legally and financially independent.
Its 178 member countries provide its share capital and collectively
determine its policies.
The mission of IFC (www.ifc.org)
is to promote sustainable private sector investment in developing and transition
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, helps clients improve social and environmental
sustainability, and provides technical assistance and advice to governments
and businesses. From its founding in 1956 through FY05, IFC has committed
more than $49 billion of its own funds and arranged $24 billion in syndications
for 3,319 companies in 140 developing countries. IFC’s worldwide committed
portfolio as of FY05 was $19.3 billion for its own account and $5.3 billion
held for participants in loan syndications.