Moody’s Latin America (Moody’s) has assigned a rating of Aaa.ar (Argentine National Scale) and of Ba3 (Global Scale, Local Currency) to the Debt Securities (VDF) of Fideicomiso Financiero Tarjeta Privada XVIII issued by Banco de Valores – acting solely in its capacity as Issuer and Trustee.
Moody’s also assigned ratings of Ca.ar (Argentine National Scale) and Ca (Global Scale, Local Currency) to the subordinated Certificates.
STRUCTURE
Banco de Valores S.A. (Issuer and Trustee) issued one class of peso-denominated, floating-rate bonds (VDF) and a residual piece (CP), all of them backed by a pool of credit card receivables originated and serviced by Banco Privado de Inversiones (BPI). The VDF original balance is equal to 80% of the original pool balance.
At closing, the VDF were backed by credit card outstanding balance
generated by eligible accounts. The ownership of those accounts remains with the originator but the receivables assigned to the trust. The transaction has five reserve funds: an expenses fund, a liquidity reserve fund, a backup servicer replacement fund, and sinking funds for the interest and principal.
The VDF will bear a floating interest rate (BADLAR + 300bps) with a minimum rate of 13% and a maximum rate of 22%. If an early amortization event occurs, the revolving period will terminate automatically.
After the grace period of one month and beginning in the second month
after closing, scheduled interest and principal will be paid in that order, on each payment date. Principal is scheduled to be paid in six monthly installments. If the scheduled principal is not paid on time, it will not constitute an event of default under the terms of the transaction documents, given that the promise to investors is to receive ultimate principal before the legal final maturity date.
During the revolving period, the originator will sell new receivables to the trust. These receivables will be purchased from the cash flow coming from collections. The documents of the transaction allow for a direct offset of these two cashflows. By having this procedure no cash has to be transferred back and forth to the trust account and as a result, trust expenses are minimized.
SELLER AND SERVICER
BPI is the seller of the receivables and the primary servicer of the transaction. The bank was founded in 1993 to provide financial services to the middle-high and high income segment of the market. In 1996, BPI began issuing MasterCard and Visa credit cards to its customers.
Banco Macro S.A. (BM) is the designated backup servicer. If a servicer replacement trigger is hit, the trustee is obligated to immediately notify BM and Visa and MasterCard. The trustee, who receives pool and borrower data from the servicer on a monthly basis, will transfer this information to the backup servicer. In addition, Visa and MasterCard will also have duplicate data which they can transfer to BM, if necessary. Given that BM is a member of the Visa and MasterCard system, the transfer of data should be straightforward.
BM will be entitled to receive this information as the new owner of the
accounts according to the conditional assignment contract which will become effective upon the occurrence of a servicer replacement event.
Thus, even if BPI’s membership in the Visa and MasterCard networks is terminated, credit card customers will not have their credit lines suspended.
The servicer will transfer collections to the trust account on a weekly
basis. As a result, there is one week of commingling risk at the originator/servicer level which may affect the deal should the
originator/servicer enter into a reorganization process. This risk is mitigated by the ability of BM, once it is appointed as backup servicer, to service the receivables, and by the servicer replacement reserve account that will be funded at closing with 0.5 times the next interest payment. This reserve account can be used to pay interest during the transition process. In addition, there is another reserve account equivalent to 1.5 times the next interest payment. These aggregated funds provide a total coverage of two monthly interest payments.
RATING RATIONALE
Moody’s considered the credit enhancement provided in this transaction
through the initial subordination levels (20% for VDF), as well as the historical performance of BPI’s portfolio. In addition, Moody’s considered factors common to consumer loans securitizations such as delinquencies, payments rate and losses; as well as specific factors related to the Argentine market, such as the probability of an increase in losses if there are changes in the macroeconomic scenario in Argentina.
These factors were incorporated in a cash flow model that takes into account all the relevant features of the transaction’s assets and liabilities. Monte Carlo simulations were run, which determines the expected loss for the rated securities.
In assigning the rating to this transaction, Moody’s assumed a triangular distribution for losses with minimum of 2%, most likely of 10%, and maximum of 30%. Also, Moody’s assumed a triangular distribution for the payments rate with minimum of 10%, most likely of 15%, and maximum of 30%.
Finally, Moody’s also evaluated the back-up servicing arrangements in the transaction. If BPI is removed as servicer, Banco Macro S.A. will be appointed as the back-up servicer.
For more information on this transaction, please refer to the New Issue Report to be published in moodys.com. In addition, Moody’s publishes a weekly summary of structured finance credit, ratings and methodologies, available to all registered users of our website, at www.moodys.com/SFQuickCheck.
RATING ACTION
Originator: Banco Privado de Inversiones S.A.
ARS 22,400,000 in Floating Rate Securities of “Fideicomiso Financiero Tarjeta Privada XVIII”, VDF rated Aaa.ar (Argentine National Scale) and Ba3 (Global Scale, Local Currency)
ARS 5,600,000 in Certificates of “Fideicomiso Financiero Tarjeta Privada XVIII”, CP rated Ca.ar (Argentine National Scale) and Ca (Global Scale, Local Currency)
